Ukraine cuts natural gas use 8% yoy, imports 30% yoy in 8M13

Ukraine decreased its natural gas consumption 7.7% yoy to 32.36 bcm, the Energy Ministry reported on September 30. Domestic gas production increased 2.7% yoy to 13.89 bcm, while gas imports decreased 29.7% yoy to 15.31 bcm in 8M13, according to the released statistics. In August alone, Ukraine imported 2.86 bcm of gas (+4.6% yoy) and produced 1.76 bcm (+4.5% yoy).

Alexander Paraschiy: Ukraine’s 8M13 gas production improved compared to 1Q13, when no growth was recorded, while gas consumption declines were steeper in 1Q13 (-9.4% yoy, on a warmer winter mainly). If the current trend continues, Ukraine will report 3.3% growth in gas production to 21.2 bcm in 2013 (0.8 bcm below plan).

At the same time, we see the year’s gas consumption in Ukraine, in the most conservative case, will be in line with the state plan of 51.6 bcm (-5.8% yoy). Given that this heating season will start earlier in Ukraine (in the first days of October, vs. the usual start on October 15), and most of Ukraine’s heat is produced using gas, total consumption in 2013 may end up exceeding the state plan. Yet even if gas consumption stays within the plan, Ukraine will have to import 28.1 bcm of gas in 2013 to meet its planned year-end stock. This corresponds to 17.2 bcm of gas imports in 2H13 (+57% h/h) and 3.2 bcm for each month in September-December (67% more compared to 8M13 monthly average).

We see this task as a challenge for the government, which is striving to save as many international currency reserves as possible. Yet this high need for gas imports will be among the factors that will create enormous pressure on the Ukrainian hryvnia in the next two months.