Mitigating Risks and Protecting Ukraine’s Energy Sector

 

Executive Summary

Ukraine’s ongoing conflict has had a devastating impact on its energy infrastructure and economic activity, posing challenges for governments, NGOs, and commercial entities operating in the country. Its size, complexity and the dynamic nature of the risk caused by the ongoing conflict make operations difficult.

However with high levels of understanding, good planning and effective Security and Risk Management policies and capabilities, no part of the country or market is unreachable.

Amidst this crisis, Prevail Partners has emerged as a crucial partner, providing expertise and solutions for risk management, intelligence gathering, and crisis management. With their support, Ukraine is working towards revitalising and strengthening its energy capabilities for a more sustainable future.

This case study highlights Prevail’s role in protecting Ukraine’s energy infrastructure. By leveraging their experience and skills in managing risks in conflict zones, Prevail Partners offers a silver lining for the Ministry of Energy by enhancing security measures and operational capabilities.

Their collaboration is a testament to the critical role of private sector involvement in rebuilding and protecting crucial infrastructure during times of conflict.

 

Background

Ukraine has been embroiled in a conflict since 2014, with Russia-backed separatists fighting against Ukrainian forces, which intensified dramatically on February 24, 2022, when Russia launched a full-scale invasion from Belarus, Russia, and Crimea.

The ongoing conflict has caused widespread destruction and loss of life, leading to significant economic repercussions for the country. One of the most affected sectors is Ukraine’s energy infrastructure, with critical assets damaged or destroyed.

The conflict has severely impacted the country’s access to natural resources such as coal and gas, resulting in energy shortages and high costs for consumers. Power outages have also become common, causing disruptions in industries and daily life.

As a result, there is an urgent need for effective risk management and crisis management strategies to protect critical energy infrastructure and support economic growth in the country.

Close up of the Ukrainian Oil and Gas Refinery - Protecting Ukraine’s Energy Infrastructure - Prevail Partners

Energy Sector Under Siege

Since February 2022, Ukraine’s energy infrastructure has been under consistent attack with varying intensity and results across the country. According to Ukrainian National Security and Defence Council – War Risks Data, there have been a total of 926 recorded attacks against the energy sector between February 2022 and January 2024.

This includes 487 attacks in 2022, 391 in 2023, and 48 in January 2024. These attacks have utilised various methods such as artillery shelling, cruise and ballistic missiles, and uncrewed aerial vehicles (UAVs).

In October 2022 alone, there were multiple attacks on Ukraine’s energy infrastructure, including cyberattacks on energy companies.

These attacks have caused significant damage to the country’s integrated energy system, affecting power generation and transmission infrastructure. Additionally, the destruction of the Kakhovka hydroelectric power plant (HPP) dam during this period had severe consequences for both the energy sector and the Khersonska region.

Throughout 2023, there were regular and intense attacks on infrastructure across the entire country. Eastern and southern regions were more affected due to their proximity to the frontline, which runs from Kharkiv to Kramatorsk, Dnipro, Zaporizhia, Kryvyi Rih, Kherson, Mykolaiv, Odesa, and Izmail. During the summer months of 2023, the attacks across other Ukrainian regions were fewer. Attacks renewed during the 2023–2024 heating season.

These factors are reflected in the changes in the damage and losses, especially between March and December 2023.

“Ukraine’s critical energy infrastructure remains vulnerable, with up to 6000 unprotected sub-stations close to the front line exposed to continued attack. “

Confirmed attacks against electrical infrastructure since the start of open hostilities on Feb 22, as taken from the Ukrainian Government COTA system. Date April 2024.

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Ukraine’s Energy Landscape: Past and Present

Before February 2022, the energy sector played a key role in Ukraine’s economic growth as well as its national security, and increasingly supported the government’s goal of modernising the economy.

The energy supply sector represented 7–8 percent of GDP with gas transit fees from Russia representing about 0.3 percent of GDP.255.

The entire population had access to electricity, and 94.9 percent had access to clean fuels for cooking.

Central heating had high penetration (about 47 percent), particularly in the bigger cities.

The gas distribution network covered 74 percent of the population, and 89 percent of the population had access to clean water, thanks to pumped water distribution systems.

However, with the ongoing conflict and attacks on energy infrastructure, Ukraine has faced significant revenue losses. According to estimates from the Second Rapid Damage and Needs Assessment (RDNA2) and Third Rapid Damage and Needs Assessment (RDNA3), these losses exceed US$54 billion as of December 2023.

These losses can be attributed to regular attacks on energy infrastructure, displacement of a significant portion of the Ukrainian population, economic contraction, and an increase in poverty.

The losses are also compounded by the decrease in collection rates, particularly in regions close to the front line.

The sectors most affected by these losses include:

  • power (US$31.97 billion)
  • gas (US$8.11 billion)
  • fuel oil (US$7.74 billion)
  • coal (US$6.09 billion)
  • cost of debris removal and demolition (US$0.136 billion)

These losses not only impact the energy sector itself but also have far-reaching implications for other industries and the overall economy.

Impact on the Ukrainian People

The ongoing conflict has had a significant impact on the Ukrainian people. The displacement of around 10 million people as of December 2023 has resulted in an increase in poverty, making it difficult to meet basic needs such as shelter and food. The destruction of critical infrastructures has also led to disruptions in daily life, including power outages and water shortages.

Moreover, the attacks on energy infrastructure have also caused environmental damage, posing a threat to the health and safety of those living in affected areas. For instance, the destruction of the Kakhovka hydroelectric power plant dam resulted in flooding that contaminated nearby waters with oil and debris.

The energy crisis has also affected businesses and industries across Ukraine, leading to job losses and economic instability. This not only impacts the Ukrainian people but also has implications for regional and global economies.

The economic fallout has led to a massive impact on global economic growth, with the war contributing to volatile commodity and energy prices, exacerbating food shortages, stoking inflation, and impeding post-pandemic recovery.

This has caused disruptions in trade, high inflation, and tightening global financing conditions.

The war has scarred economic activity through destruction of agricultural land and reduced labour supply, necessitating substantial financial support for recovery and reconstruction efforts.

Impact on Ukrainian People – Protecting Ukraine’s Energy Infrastructure – Prevail Partners

As Ukraine continues to face an ongoing energy crisis and the attacks on energy infrastructure continue, it is crucial that the international community provides support to rebuild critical sectors such as energy. However, there are significant challenges that organisations and governments must navigate in order to effectively address this situation.

 

Challenges and Implications for Organisations

The energy crisis in Ukraine has created an unstable and challenging environment for organisations operating in the country.

These include:

  1. Security concerns: With active fighting taking place, there is a constant risk to personnel and assets involved in energy operations. This makes it difficult for companies to ensure the safety of their employees and maintain operational continuity.

 

  1. Disruption of supply chains: The conflict has led to disruptions in the supply of resources and equipment needed for energy operations. This has resulted in delays, increased costs and difficulties in maintaining reliable production.

 

  1. Damage to infrastructure: Critical energy infrastructure, such as pipelines and power plants, have been damaged or destroyed during the conflict. This requires significant investments and technical expertise to rebuild and modernise, hindering progress in the sector.

 

  1. Economic impact: The ongoing conflict has had a severe economic impact on Ukraine, leading to a decrease in foreign investment and trade, which is crucial for rebuilding and developing the energy sector.

 

“With the need for immediate action, the Government of Ukraine turned to Prevail Partners for their expertise in managing risks in volatile environments.”

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Solution to Protecting Ukraine’s Energy Sector

Despite the challenges faced by Ukraine’s energy sector due to the ongoing conflict, the promise of a brighter future prevails. The Ukrainian government continues to work with international partners to devise solutions and rebuild damaged infrastructure.

A crucial part of this effort is the consortium led by Prevail Partners. Authorised by the Ministry of Energy, they conduct feasibility studies and offer technical assistance for reconstruction.

With the delivery of a solution that incorporates proven mitigation technologies and capabilities in a modular manner, they adhere to local requirements.

A pivotal part of their strategy is the capacity to gather and analyse real-time information on the security situation in conflict-stricken areas. This intelligence allows them to provide accurate risk assessments and advise the Ministry of Energy on necessary security measures.

Their proficiency in crisis management has enabled them to develop effective response plans and training key personnel within the energy sector.

Collaboration with the Ministry of Energy has led to the reinforcement of security measures at crucial energy infrastructures, reducing the risk of disruptions or attacks. This has resulted in building confidence amongst foreign investors and aiding in reconstruction initiatives.

Prevail Partners is also enabling the safe and proficient operation of government and NGO clients across the country. This has facilitated the delivery of much needed humanitarian and technical assistance while simultaneously building capacity in Ukrainian institutions.

 

High-Risk Regional Substations: A Potential US$272m Damage Threat this Heating Season

With an average cost of equipment per substation being US$1.8m and 6000 regional substations designated as high-risk by the Ministry of Energy, the cost of direct damage to these sites during the upcoming heating season is estimated to be US$272m without mitigation measures in place.

However, with Prevail’s solutions implemented, this cost could be reduced fivefold, avoiding over US$217m in direct losses and minimising overall damage to the economy by modest assumptions at US$2b.

Prevail’s mitigation measures not only provide cost-effective and scalable risk-mitigation solutions but also include a significant capacity-building and knowledge transfer component. This will enhance the operational effectiveness of organisations operating in the Ukrainian energy sector and increase levels of resilience for future challenges.

“The deployment of modular, tailored mitigation capabilities is a viable and cost-effective way of reducing direct damage, alleviating suffering, and maintaining economic activity.”

The impacts of the ongoing conflict may be far-reaching, but with Prevail’s efforts, Ukraine’s energy future is focused on resilience, innovation, and sustainability.

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Prevail: Your Comprehensive Solution for Training, Intelligence, and Risk Management

In addition to providing essential training, intelligence, and risk management services, Prevail also offers a range of tailored solutions and on the ground support to meet the specific needs of their clients.

These include:

  • Environmental and Threat Assessments. Prevail ensure clients understand the full range of threats they face and help them develop pragmatic risk appraisals and inform their risk decision making methodology.

 

  • Intelligence. Prevail ensure all operations have an effective intelligence wrap prior to, and during activities. This intelligence is delivered through an effective fusion of remote and local capabilities.

 

  • Risk and Crisis Management. Prevail manage risks to enable clients to operate effectively. This is done through well-established and rehearsed contingency plans and robust SOPs. Should an incident occur, Prevail take all necessary steps to reduce the risk of it becoming a crisis.

 

  • Journey Management. Prevail ensure that all movements are planned in a timely fashion in collaboration our client. Prior to any movement serials, staff  receive detailed briefings to ensure they are aware of risks and understand ‘actions on’ in case of incidents. All journeys are tracked passively and actively.

 

“A range of solutions have been developed which can be deployed to mitigate the risk to a range of critical sites and components and which can be deployed at large-scale.”

 

Conclusion

The ongoing conflict in Ukraine has taken a toll on the country’s energy sector, damaging infrastructure and disrupting economic activity. However, through cooperation with international partners, Ukraine is working towards rebuilding and strengthening its energy capabilities.

Prevail Partner’s consortium plays a crucial role in this effort, providing expertise and solutions to mitigate risks and enhance resilience. With their support, Ukraine’s energy future is focused on sustainability and innovation.

Contact Prevail Partners at +44 (0) 203 961 9923, or email to learn more about how we can help you achieve your goals.

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