Ukraine's first biomethane plant connects to gas network

Ukraine's first biomethane plant connects to gas network
Ukraine's first biomethane plant connects to gas network Ukraine is now producing biomethane gas / bne IntelliNews
By bne IntelliNews April 17, 2023

Ukraine’s Regional Gas Company (RGK) has connected the country's first biomethane plant to its gas network., UBN reported.

This plant, located in the Chernihiv region, will produce approximately 3mn cubic metres of gas each year, which will be used to supply nearly 1,500 customers, from the circa 20 bcm of gas that Ukraine already produces domestically. According to the RGK, biomethane is no different from natural gas and can be immediately used by households and industries.

Initially, the gas will enter the network during the coming autumn-winter period and reduce the need to import gas. Ukraine has an approximately 10 bcm deficit of gas production. But after the construction of the second stage of the project and the ringing of the networks, the supply will be year-round.

Ukraine’s Hals-Agro company built the biomethane plant in 2018 to produce biogas, which was then used to generate electricity. Thanks to generous green tariffs introduced by former President Petro Poroshenko to aid Ukraine’s effort to wean itself off imports of Russian gas, there has been a boom in renewable energy investment over the last five years, worth circa $5bn. The new plant was equipped with a biomethane production module in 2021 and connected to the Chernihivgaz network early in 2023.

RGK and the European biomethane STX market trader signed a memorandum in 2022 to purchase biomethane from Ukraine. This initiative aims to help Ukraine develop its biogas industry, which can provide up to 20% of the European Union market.

According to the head of the Bioenergy Association of Ukraine, Heorhiy Heletukha, Ukraine has ideal conditions to develop its biogas industry, reports UBN. Ukraine has the largest agricultural land area in Europe, which can produce ample raw materials for biogas and biomethane production. Furthermore, Ukraine has a well-developed gas network and the biggest gas storage facilities in Europe, which can easily distribute biomethane.

Due to its location near the EU, Ukraine has the potential to satisfy up to 20% of the premium biomethane market, which is in high demand.

Ukrainian businesses have already started building five biomethane plants with the capacity to produce 20mn cubic metres of biomethane per year. However, the price of biomethane needs to be profitable for these plants to operate.

For a biomethane plant to be profitable, the price of biomethane must be between €800-900 per thousand cubic metres, significantly higher than the normal price for Russian piped gas, but currently on a par with the spot market prices.

Although the EU biomethane market can pay up to €1,000 per thousand cubic metres, the domestic market can only pay €450, which is not enough to make these plants profitable, reports UBN.

The new plant is part of Ukraine’s plans to be a hub for green energy production for Europe and to promote high ESG standards.

The biomethane project comes in the midst of Ukraine’s efforts to rebuild its energy infrastructure that has been targeted by Russia during the war.

Ukraine's energy and thermal infrastructure will have suffered $10bn in damages from the war as of June this year – five times more than last June, according to to a new comprehensive assessment by the United Nations Development Program (UNDP) and the World Bank.

The largest share of losses falls on the electric power sector at almost $6.5bn, where the share of damage to nuclear power plants (NPPs) is $770mn, the report estimates. 

At the same time, Ukraine’s urgent needs for emergency repairs of critical infrastructure facilities (electricity and heat supply) are assessed by UNDP and the World Bank at more than $1.2bn, UBN reports.