Ukraine Wants to Revive its Oil and Gas Sector with Canada’s Help

Ukraine’s leading oil and gas producer, Ukrnafta, wants to reduce the country’s dependency on imported petroleum and seeks to collaborate with Canada to achieve this.

The company’s executive vice president, Denys Kudin, is in Canada after visiting Vienna, Washington D.C., and Houston to find investors who are interested in restoring Ukraine’s mature oil reserves.

“We believe that it’s not only a good thing to do, but it’s also something that can bring you some commercial reward,” stated Kudin, at this week’s Global Energy Show in Calgary.

He presents this as an opportunity to enter the growing oil market at its early stages while allowing Ukraine to achieve energy self-sufficiency—a longstanding target that has become of greater significance due to the country’s conflict with Russia.

Kudin faces the challenge of convincing investors to fund growth in a war-torn country, especially during a time when climate change fears have made oil industry investments harder to attract.

Ukraine imports oil and gas despite its own hydrocarbon reserves and a century of oil and gas exploitation.

Kudin admitted that Russia, Belarus, and Poland supplied most of Ukraine’s oil before the war. Since then, the country has actively sought other supply routes and sources.

“We had to swiftly transition our logistics from the east to the west in just one day, and it posed significant challenges due to the unpreparedness of the infrastructure,” said Kudin, Ukraine’s former first deputy minister of economy.

“To address the immediate situation, we resorted to transporting diesel and petrol by individual cars, which significantly increased the cost burden and ultimately placed the financial strain on customers.”

The Donbas conflict has hurt Ukraine’s coal output and transportation. Thus, increasing domestic energy output is urgently needed.

Ukrnafta, which came under Ukraine’s government last October under wartime legislation, has revealed a key part of its strategy to rejuvenate 20 mature oil brownfields in the west and north-east. According to Kudin, these idle fields have significant oil reserves.

Kudin claims that these brownfields are far enough from the conflict zone to be safe investments. The proposal would use the extracted oil in Ukraine rather than exporting it.

He estimates a $1 billion US annual capital investment for the project. Ukrnafta has obtained $250 million US, however more partners are needed to fund the project.

“We believe Alberta to be the oil and gas capital of Canada, so we believe that this is the most appropriate place to visit, and we’re happy to say that Canadian companies are quite favourable to our offer now,” said Kudin.

Zenon Potichny from the Canada-Ukraine Chamber of Commerce stressed the morality of investing in this project.

“Absolutely companies will not go [in] if they know 100 per cent they’re going to lose money,” he said.

“But I mean, if you’re making 10 per cent or eight per cent or six per cent, it might not be a huge difference if you’re also helping the country that is fighting for democracy, for freedom of the whole world.”

He warned that oil projects, even those beyond the current conflict zone, might be attacked by drones and missiles.

Investing in Ukraine may be seen by some as a way to help the country’s defences against Russia, while others may see it as fueling hostilities or taking unfair advantage of the situation.

From January onwards, Export Development Canada, a governmental financial corporation that offers Canadian companies commercial loans, equity, and insurance, has ceased providing fresh direct financing to the “unrestricted international fossil fuel [sector],” according to a spokesperson’s statement.

Kudin, on his part, holds the belief that upgrading Ukraine’s oilfields, which currently operate using outdated equipment, with modern technology will contribute to the reduction of carbon emissions associated with oil and gas production.

Currently, he is progressing with his worldwide tour, encompassing visits to Italy, the Czech Republic, and concluding in London next week for the international Ukraine Recovery Conference. Nevertheless, he remains optimistic about the potential involvement of Canadian companies.

“We know that Ukrainian diaspora is active in Canada and that we hope that those ancestor roots will help us reach our goal,” he said.