The Cabinet of Ministers is directing nearly 939 million hryvnia from the Finnish-Ukrainian Investment Fund towards the construction of gas-piston power generation in two regions: up to 40 MW in Ivano-Frankivsk Region and up to 20 MW in Lviv Region. The funds are credit-based, obtained under a framework intergovernmental agreement signed in November 2024.
Why Ukrnafta and why now
The project executor is Ukrnafta, a state oil and gas company conducting extraction in the same regions where power generation will be built. The logic is straightforward: the company extracts gas from fields in Lviv and Ivano-Frankivsk regions, and instead of transporting it to the general network, it plans to burn it on-site to generate electricity.
According to Ukrainian Energy, Ukrnafta expects to create up to 370 MW of new generating capacity using this scheme. In 2024, the company's gas production increased by 6.5% to 1.17 billion cubic meters. This means the resource base for power generation is genuinely expanding.
"The reason we were able to support Ukrnafta is that they have demonstrated not only excellent financial results, but also genuine corporate governance"
Matteo Patrone, Vice President of the EBRD
The EBRD has already provided financial support to the company after Ukrnafta established an independent supervisory board and conducted internal management reforms. The Finnish credit is the next step along the same track of international creditor confidence.
Distributed generation as a military strategy
Context matters: the winter of 2025–2026 has become one of the most difficult for the energy system—massive attacks and temperatures down to −25°C. In response, the Cabinet of Ministers approved on May 15 a procedure for forming a national reserve of autonomous power generation in case of blackouts.
Distributed generation is a deliberate shift away from centralized facilities, which are easy targets. Small-capacity gas-piston units scattered across fields are harder to strike and easier to restore. Since the start of the full-scale invasion of Ukraine, 1.4 GW of new gas generation capacity has already been commissioned, of which 1.1 GW is connected to networks.
What remains unanswered
The credit nature of the financing means Ukraine will repay this money—along with interest. Ukrnafta receives funding for commercial development at the expense of a state debt obligation. The mechanism for distributing future electricity sales revenues between the state budget and the company has not been publicly disclosed.
If Ukrnafta truly introduces the announced 370 MW of generation capacity, this model—an extraction company as an energy supplier—could become a template for other fields across the country. However, this will only happen provided that the April changes to the gas PSO, through which most cogeneration facilities have already lost preferential gas pricing, do not make such projects unprofitable before construction is completed.
