Ukraine is updating its energy strategy, the new energy and environmental protection minister, Oleksiy Orzhel, said at a press briefing on Sept. 2.
Orzhel said he will prioritize energy efficiency, boosting natural gas production and integrating energy and environmental policy. The ministries of energy and environmental protection were combined last week to eliminate conflicts.
“The main goal of combining the two ministries is to ensure an integrated approach to state policy in the use of natural resources and energy and… to overcome the negative impacts of global climate change,” said Orzhel.
The minister said that Ukraine suffers from a cycle of “energy poverty.” Energy costs will be a growing burden on the population, which will not be able to afford them. This, in turn, will burden the state with the need for subsidies. Improving energy efficiency will be required to solve this challenge, Orzhel said.
Currently, Ukraine uses two to three times more resources to produce the same unit of output than many other economies. That ratio is rising due to aging buildings, infrastructure and factories. The lack of investment in energy — including inefficient use — is a major factor.
Experts say that Ukraine should invest three or four times more in housing stock, state-owned buildings, infrastructure and industry.
The energy minister said that energy efficiency should become the primary driving factor behind economic growth.
Orzhel also said that boosting natural gas production is a priority, as Ukraine is not fulfilling its potential. The government will look into “legislative initiatives” to do so.
According to geological experts, Ukraine has over a trillion cubic meters of gas underground and much more in offshore reserves, which are 96 percent untapped. In 2018, Ukraine produced 21 billion cubic meters of natural gas, and imports a lot of it Europe, which buys a lot of it from Russia.
Ukraine has tried to attract investment into some of its oil and gas blocks by auctioning off production rights.
On Sep. 1, Ukraine signed an agreement with the U.S. and Poland, aiming to enhance gas supply security and make the region less dependent on Russia for its gas supplies. Poland, which has a liquefied natural gas terminal, can import LNG and sell it to Ukraine.
Orzhel said that Ukraine can soon expect a “significant increase” in the volume of gas imported from Poland.
Separately, the ministry will also review existing tax policy to eliminate taxes, such as labor taxes, it sees as harmful to economic development. On the other hand, Orzhel said that he wants to implement ecological taxes and create “red lines” on emission levels.
Orzhel said that he wants to see minimal government interference in energy markets, which he sees as harmful to investment.
