UBS-Midstream Natural Gas Russia-Ukraine War Impacts Both CountriesNat Gas Infrastructure-20251012

What Happened?

According to Bloomberg, Russian strikes have wiped out ~60% of Ukraine's natural gas production in recent days. Russia has ramped up drone and missile strikes in recent weeks, targeting Ukraine's gas and electricity infrastructure. Naftogaz, Ukraine's largest national oil and gas company, called the attack "the most massive" strike on gas infrastructure since the war began. The strikes have raised concerns about potential shortages and the need for additional imports. Ukraine's Energy Minister Svitlana Hrynchuk noted that Kyiv plans to increase nat gas imports by 30% as a result of the attacks. As per Ukraine's Energy Minister, if strikes continue, expects it will need to buy roughly 4.4Bn cubic meters of gas by the end of March at a cost of €1.9Bn euros ($2.2Bn), in order to survive the winter. As per Bloomberg, Ukraine is also seeking financial aid to import gas to cover the production shortfall.

However, Ukraine has also intensified attacks on Russian energy infrastructure. Whereas Russian forces have targeted Ukraine's gas production, Ukraine has focused on Russia's oil refineries, with Ukrainian drones reportedly having hit at least 16 of Russia's 38 refineries since August. Additionally, Ukraine struck the Korobkovsky gas processing plant, the largest nat gas processor in Russia's Southern Federal District, through an overnight drone strike on October 9th. As per Reuters, Ukrainian President Volodymyr Zelenskyy stated the country's long-range strikes on Russian energy facilities may have reduced gas supplies in Russia by 20%. An attack earlier this week hit the Kirishi oil refinery, halting one of Russia's largest crude processing units.