Ukraine's Promising Future in Global Energy Markets
While predicting the end of a war is a dubious exercise, there are nonetheless rumblings in the United States and in Europe about a winding down of Putin's war of aggression in Ukraine and that closure may occur this year.
Picking up the considerable detritus of war strewn about this vast country will coincide with deliberations on the role of energy in lifting Ukraine up and particularly how the existing natural gas infrastructure could be used to transport hydrogen. This is the central topic in Center for Strategic and International Studies (CSIS) just released The Role of Gas In Ukraine's Energy Future by Ben Cahill and Leslie Palti Guzman.
This scenario would evolve from promising future areas in Ukraine via Slovakia and the Czech Republic to large demand centers such as Germany and the rest of the European Union. Ultimately, Ukraine’s future as a hydrogen producer depends on sufficient demand from Europe, project economics, and technical capacity.
To wit, Ukraine is examining the possibility of repurposing its existing pipeline infrastructure to transport and export hydrogen. There are several ongoing pilot projects focused on blending hydrogen in the country’s distribution network to analyze the impact on material and equipment. In other jurisdictions, it appears that up to 13 percent blending may be possible. Using Ukraine’s existing infrastructure to distribute hydrogen will underscore the need to modernize and replace the grid’s existing gas equipment such as valves, ceiling materials, and gas meters. Europe’s hydrogen infrastructure map suggests that Ukraine will produce hydrogen and that its existing infrastructure will be converted to carry hydrogen. The European Union has also delivered a grant to a Ukrainian company to increase biogas and hydrogen production.
In their summary, the authors highlight that Ukraine’s gas sector will continue to provide a lifeline after the war to rebuild the country’s industry, bolster energy security, and supply vital revenues for the state. And they assert that it is in the interest of the European Union and the United States to financially assist the reconstruction and redesign of Ukraine’s energy infrastructure. Ukraine will most likely remain a transit country for Russian gas, albeit with reduced flows. Ukraine’s gas sector also has the potential to enhance Europe’s energy security with its vast underground gas storage and indigenous gas supply. Depending on market conditions and Ukraine’s supply growth potential, Ukraine has the longer-term potential to become a gas exporter to the European Union.