Ukraine Prepares for Biomethane Exports to Europe

October 04, 2022

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by Aura Sabadus (Independent Commodity Intelligence Services)Three companies have reached an agreement to sell the first volumes of biomethane from Ukraine to Europe, according to RGC, Ukraine’s largest gas distribution company said in a statement on 30 September.

Ukraine-based RGC and Gals Agro, along with Dutch trader STX, agreed to facilitate the sale of biomethane via virtual trading.

This means that the first biomethane volumes would be injected by RGC into the Ukrainian gas grid and sold to the virtual trading point (VTP).

The same amount of gas would be netted out in Europe, where the companies are also involved in trading biomethane.

Importantly, buyers of Ukrainian biomethane will receive a document certifying its Ukrainian origin.

“We develop our project step-by-step and currently are entering into its final stage, [as in] planning the actual sale of biomethane to the EU. It will allow us to work in a sustained way and plan output expansion”, said Serhii Kravchuk, CEO, Gals Agro, Ukraine’s first biomethane producer.

At the same time, the memorandum of understanding signed by the three companies establishes the framework for other biomethane producers to sell the green gas to Europe. This is the first arrangement between all parties, including the producer, buyer, and the infrastructure side.

“We currently sell approximately 10% of biomethane in Europe and plan to expand. We were the first to sell biomethane originating from Norway, Sweden and Denmark. Now it’s time for biomethane from Ukraine,” said Bart Wesselink, chief financial and risk officer at STX Commodities B.V.

RGC has already started works to connect Gals Agro production facilities to gas distribution networks in the Chernihiv region. This company will be the first biomethane plant in Ukraine to be connected to gas distribution networks and sell biomethane to Europe.

Aside from the project in the northern Chernihiv regional, RGC is also in the process of connecting the second biomethane plant in the west-central Vinnytsia region to gas distribution networks.

RGC told ICIS earlier in August , it had received 30 applications to connect biomethane plants.

The plant in the northern Chernihiv region had already been producing biogas and was expecting special equipment from European partners to convert it to biomethane.

The plant could feed three million cubic metres of biomethane to the grid before the end of the year. Other companies that are expected to be connected to the grid could produce higher volumes, close to 10mcm/year, he added.

Thanks to its vast agricultural landmass, Ukraine has some of the strongest potential for biomethane production in Europe. It has been tipped to produce as much as 8bcm/year of biomethane by 2050, or nearly a third of its pre-war gas demand. READ MORE

The fuel of the future. Prospects of biomethane in Ukraine (UA Transmission System Operator)

The RGC explained why the production of biomethane remains attractive during the war (Ecopolitic.com.ua)

Ukraine is ready to sell the first batches of biomethane to the EU. (Ukraine Business News)

Ukraine is ready to sell the first batches of biomethane to the EU. (Ukraine War 24)

RGC, Gals Agro, Netherlands' STX Plan to Sell First Ukrainian Bio-Methane to Europe (Interfax)

Gals Agro settles biomethane supply to EU, tripartite memorandum signed (Latifundist.com)

Ukraine plans to completely abandon the use of natural gas for heating. (Ukraine Business News)

Ukraine mulls heating homes with garbage (Daily Sun)

UKRGASBANK issued a letter of credit for the purchase of biogas plant equipment for a leading Ukrainian agricultural enterprise (UKRGASBANK)

Excerpt from Ecopolitic.com.ua: The REPowerEU plan aims to produce 35 bcm of biomethane annually by 2030. And Ukraine can become an essential element of this process because we have a significant potential to import biomethane to Europe. Market experts told us about the prospects for producing this fuel in Ukraine and its export to the EU in the GTSOU column «Expert Opinions».

Valerii Bezus, Head of the State Agency on Energy Efficiency of Ukraine, is convinced that the development of biomethane production and the use of biomethane cannot be delayed and shall be carried out, first of all under national interests in the field of energy security. Therefore, the Agency is working to intensify the development of this industry.

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As for the competitiveness of biomethane, it is evident: that given the current gas prices, biomethane projects are economically attractive, and the Head of the State Agency for Energy Efficiency is sure.

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For Ukraine, with its developed agricultural industry, the development of biomethane is an opportunity to promote a new export industry, turning unnecessary agricultural residues and household waste into a new export product, – says Willem Coppoolse, Group Director of Energy Resources of Ukraine (ERU).

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According to the Bioenergy Association, the potential for biomethane production in Ukraine is 9.7 billion cubic meters per year. A significant deterrent to development today is war – investors do not dare to build new biomethane plants under martial law, – says Georgiy Geletukha, Head of the Board at UABio.

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It is now that we should invest in Ukrainian gas production to direct the profits to the development of biomethane and other green technologies and, thus, reduce gas imports, – says Oleksiy Ryabchin, CEO Advisor to the Chairman of the Board of NJSC Naftogaz of Ukraine.

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The primary motive for introducing biomethane capacity today is to strengthen our energy security. Any additional energy carrier will be helpful and will create safety stock for the heating period. Up to the moment when the first biomethane production facilities are put into operation in Ukraine, there will be a crisis demand for gas, and it is biomethane that will serve our national interests and can help Europe to decarbonize and de-russify the energy sector, – believes Mykola Kadenskyi, Head of the Network Development Division at Gas TSO of Ukraine.

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Even a GTS operator can become a consumer of biomethane and buy it for their own needs while reducing their carbon footprint. Also, biomethane can contribute to the replacement of a scarce diesel (which the Armed Forces of Ukraine need so much now) and be used in a widespread network of NGV-refueling compressor stations», – said Mykola Kadenskyi. READ MORE

Excerpt from UKRGASBANK: In just a few days, the state UKRGASBANK processed and issued a documentary letter of credit to purchase biogas plant equipment from a Danish global manufacturer.

The equipment will be manufactured within a year and installed at a poultry factory in Ladyzhyn, Vinnytsia oblast. Using latest technologies, electricity and heat will be produced from chicken manure.

The letter of credit was supported by the EBRD under the Trade Facilitation Program (TFP) and a first-class European bank acting as confirming bank. The project totals EUR 12.7 million.

For reference: For two years in a row, UKRGASBANK has been the best bank in trade finance under the EBRD’s Trade Facilitation Program. And recently, we have carried out the 200th deal with the support of the EBRD. READ MORE