Ukraine’s Naftogaz Braces for Upcoming Winter Amid Ongoing Challenges (2025)

The winter is barely over, but Ukraine is already bracing itself for the next one.

To start preparing for the 2025 winter heating season, Ukraine’s state-owned gas giant Naftogaz secured €430 million ($489 million) from the European Bank of Reconstruction and Development (EBRD), the company’s Monday press release says.

However, the funding is far from enough as Ukraine’s gas reserves have reached a historic low, and more money is needed to both purchase gas and safeguard existing infrastructure from Russian strikes.

Funding from EBRD

The EBRD funding is split into two parts: a grant from the Norwegian government and a regular loan from the EBRD, totalling €430 million.

However, at the moment of publication, the EBRD has only disclosed details about the grants from Norway. It is the official signing document through which Norway will transfer the cash to EBRD’s accounts.

The total Norwegian grant support for Naftogaz’s gas imports in 2025 is estimated to be €138.6 million ($149.6 million). It will be split into two transactions – €85 million and €53.6 million ($91.5 million and $57.7 million respectively).

Naftogaz will receive the remaining funding as a regular loan from the EBRD, but the deal with the EBRD has not been signed at the time of publication.

Why the rush?

Facing a 50% decrease in domestic gas production due to Russian attacks, Ukraine plans to import gas to ensure energy access for households, businesses and industry.

With reserves at historic lows, the government must spend up to $3.5 billion on gas imports and protective infrastructure. Otherwise, Ukrainians will lack gas for heating and business operations during winter 2025-2026.

Thus far, Naftogaz has purchased 1.5 billion cubic meters of gas at the beginning of 2025. It also signed its first contract with European oil corporation Orlen to purchase 300 million cubic meters of liquefied natural gas (LNG).

Apart from the €430 million from the EBRD, Naftogaz said it is also negotiating an additional €1 billion ($1.1 billion) in financing to purchase over 2 billion cubic meters of gas.

Historic low reserves

In February 2025, Russia destroyed half of Ukraine’s internal gas production, Naftogaz reported.

Ukraine has already restored about half of the domestic gas production capacity lost in 2025. Restoring the remaining part may take six to 18 months, as it requires specialized equipment and complex logistics, according to the Centre for Economic Strategy’s (CES) April economic review.

Eastern Ukraine experienced the most significant damage due to Russian attacks, affecting “Ukrgasvydobuvannya” – Ukraine’s largest state-owned gas production company, according to the CES’s April economic review.

Now, Ukraineʼs gas reserves are at historic lows – only 5.65 billion cubic meters in storage by April 4, 2025. According to CES, this is 30% less than what’s needed for the upcoming winter.

Imports fell in March as the weather warmed, but demand is expected to rise again by October. By then, Ukraine must import at least 4-4.5 billion cubic meters of gas with an estimated cost of $2–2.5 billion due to market volatility, the CES report says.

Besides gas imports, Ukraine needs quick investments in infrastructure recovery, estimated at $160–180 million.

As Russiaʼs strikes continue, Ukraine also needs to build fortifications (drone protection shelters) for its critical gas infrastructure, which will cost around $600–800 million and require external funding, the CES said.

First gas imports in 2025 since Russia’s full-scale invasion

For more than two years of Russiaʼs full-scale war, Ukraine did not need to import gas – which is not the case anymore.

Ukraine had sufficient domestic production, though output has remained largely unchanged since 2021, Managing Director of Energy Industry Research Center (EIR Center) Oleksandr Kharchenko said during a CES online event.

“Ukraine filled its gas storage in 2021 based on peacetime standards, assuming there would be no war,” Kharchenko said.

Ukrainian private gas companies have reduced production by 32% during the full-scale war, while state-owned companies experienced only a 6% drop.

But when the full-scale invasion started, gas consumption dropped by 35–38%. As a result, Ukraine was left with a surplus of gas in its storage facilities, allowing the country to avoid importing gas for several years, Kharchenko said.

However, when Russia began targeting gas infrastructure – especially gas treatment and compressor stations – Ukraine lost pressure in the system and access to some of its own gas reserves.

To restore pressure, Ukraine started importing gas. Thanks to this, consumers barely noticed any major changes, Kharchenko said.

According to him, there are no big technical barriers to securing the necessary volume of imported gas. The main risks are commercial ones, and the possibility that Ukraine may lack the funds to make the purchases.

The amount of gas available for purchase in the West is sufficient, but not unlimited. Therefore, Ukraine must start pumping gas into its storage no later than July, Kharchenko said.

“There is a serious commercial risk here if a Ukrainian company enters the European market with a large demand – for 4–5 billion cubic meters – and starts to quickly purchase gas, this could lead to a rise in prices,” he explained.

According to Kharchenko, traders will instantly take advantage of the situation: They will sell at a high price and artificially inflate prices throughout the summer.

Lack of funding and risk of speculative price hikes on a global level create a challenge for Naftogaz, and Ukraine’s heating season depends on whether the company succeeds in tackling these difficulties.