Ukraine Signs on to Joint Hydrogen Projects With European Firms

On December 1, Ukrainian state-owned oil and natural gas major NAK Naftogaz joined the European Clean Hydrogen Alliance (ECH2A)—the pan-European industrial coalition promoting clean hydrogen (H2) investments (Naftogaz.com, December 1). The move should be seen as further confirmation of Ukraine’s willingness to export hydrogen to the European Union in the future. One could argue that the vision in that regard is still blurry. However, several specific projects and initiatives are being pushed at the moment, and they will soon help to verify whether and when the idea of Ukrainian H2 exports could, indeed, take shape.

The first initiative worth mentioning is the Central European Hydrogen Corridor, being developed by the four gas transmission systems operators from Ukraine, Slovakia, Czechia (Czech Republic) and Germany (Gas TSO of Ukraine, EUSTREAM, NET4Gas and, OGE respectively). The project was officially announced on September 15, 2021, and aims at enabling “transportation of up to 120 GWh [gigawatt-hours] per day of pure hydrogen from Ukraine to Germany by 2030.” The parties to the initiative declare that they will retrofit some of the existing gas pipelines but also build new dedicated infrastructure (new pipelines, compressor stations, etc.) to create a “hydrogen highway” linking Ukraine to Central and Eastern Europe (CEE). The technical feasibility of the undertaking is currently being explored, and the results of the studies are expected as early as 2022 (Cehc.eu, September 15).

Apart from the above-mentioned Central European Hydrogen Corridor initiative, several companies from the region are also involved in another investment project called H2EU+Store. The idea behind it is to bring together all of the parties required to enable Ukrainian hydrogen supplies to European Union customers. Therefore, the official memorandum of understanding associated with this project was signed not only by the pipeline operators but also by Austrian and Slovakian storage companies and the renewable energy producer Eco-Optima, the largest private wind farm and photovoltaics operator in western Ukraine (Naftogaz.com, November 26). Few details of the project have been released to date, but it is possible to deduce that the parties to the initiative have likely already done some economic feasibility studies confirming the sense behind their efforts. Moreover, it has to be taken for granted that the idea is being pushed by the Austrians (to establish an H2 storage hub based on inter alia Ukrainian production) and Germans (looking for Ukrainian hydrogen to support the H2 economy in Bavaria).

Meanwhile, many more ideas are also being pursued by individual companies—both private (like DTEK) and public. One of the most salient examples from recent months is a joint memorandum of understanding between Ukraine’s Naftogaz and German utility company RWE, signed in August 2021 (Rwe.com, August 22). Worth mentioning is that in this case the parties are also exploring the possibility of not only exporting/importing green hydrogen but also its derivative in the form of ammonia, which could be transported to Germany via tanker vessels. More specifically, both companies intend to launch a $500 million pilot project, which, according to the Ukrainian declarations, could happen no later than in 2024 (Interfax, October 21).

The above-mentioned projects notwithstanding, one should not overestimate the possible geopolitical significance of hydrogen for Ukraine as a country nor for the region as a whole. Of course, H2 developments could be of large importance for specific companies, and every business link between Ukraine and the EU can contribute somewhat to the former’s political stability. However, examples of the current global “hydrogen rush” should not overshadow a more sober analysis that includes risk factors as well.

First, hydrogen will not become a “new oil,” and it will not be of comparable importance for EU-Ukrainian ties as Russian gas transit is at the moment. Ukrainian H2 production, even if located close to Central and Eastern European hubs, will still have to prove its competitiveness against, for example, ultra-cheap hydrogen that can be shipped in the future from the Middle East and North Africa region.

Second, the green transformation and the development of hydrogen projects will require time and money. In a recent interview, the head of Gas TSO of Ukraine, Serhiy Makogon, assessed that the Ukrainian pipeline system could be ready to supply Europe with hydrogen no earlier than the next decade (Biz.censor.net, December 10). Furthermore, possible future pilot projects (like the one announced by Naftogaz and RWE—see above) will have to ultimately be scaled up, and this will require substantial funding.

In conclusion, the Ukrainian hydrogen developments are certainly worth watching, including in terms of the broader geopolitical situation in the CEE region. However, the perspective for that is still distant, and H2 production will not become a prompt remedy for the Ukrainian side if it loses access to Russian gas transit in the coming years.