Ukraine’s economically extractable coal reserves have been estimated at just more than 10 000 Mt. In 2003, the Ukraine produced 79.3 Mt of coal.
At the end of 2003, 190 coal mines, including open-pits, were reported to be operational, of which the majority were in the Donets Basin (Donbass) in the eastern end of the country. Most of the country’s production is located in the Donets Basin (which it shares with Russia) and the Lviv – Volhynskiy Basin. The Donets Basin, situated in the Donetsk/Donbas region of eastern Ukraine produced 36 Mt coal in 1999. Most coal production (60%) is used for public utilities and for power generation. However local coal only provides 50% of the country’s electricity needs, therefore requiring Ukraine to import from Russia and Poland. More than 90% of Ukraine’s coal production is produced from the Donets Basin, which has several deep mines. The high proportion of underground coal mines (some as deep as 1000m) has resulted in rising costs and subsequent mine closures. The industry is in dire need of investments to develop new deposits that are more suitable to lower cost open cast mining methods. It is estimated that only three or four of the country's approximately 250 mines are profitable, nearly all of them needing to be modernised. The state has continued to subsidise the industry heavily and continues to invest in new production capacity. The Ministry of Fuel and Power announced in March 2003 that it would continue construction of three new mines in the Donbass and modernise and expand production at others and also bring in additional capacity at the Kostinatynivsky lignite openpit. .
According to researchers at the Ukrainian Academy of Sciences, 80% of the mines in the Donbas have been operating for at least 20 years without any appreciable modernisation or renovation, and no new mines in the Donbas have been constructed in the last 25 years.
At the end of 2002, the government announced its plan to group the mines into seven production associations for mining coal and to establish 21 open joint-stock companies in the coal sector which would then be privatised. However, in June 2004 it was announced that Ukraine has suspended privatisation of the energy and coal mining industries in order to retain governmental control. As a result, the government has decreed the setting up of a state company, Ugol Ukrainy (Ukrainian Coal) that will encompass all existing and potentially profit-making coal mines whilst closing down non-profit-making units. This decree excludes the Pavlogradugol company, the privatisation of which had been already authorised by the President, but so far has been blocked by court hearings.
