Ukraine Signs $10bn Shale Gas Deal with Shell
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Ukraine has signed a major shale gas deal with global oil giant Royal Dutch Shell, a significant step towards weaning itself off Russian gas imports.
Due to be signed at the World Economic Forum in Davos, the 50-year production sharing agreement, reportedly worth $10 billion, will mark the biggest contract yet to tap shale gas in Europe and the largest single foreign investment in the former Soviet republic.
Ukraine has signed a major shale gas deal with global oil giant Royal Dutch Shell, a significant step towards weaning itself off Russian gas imports.
Due to be signed at the World Economic Forum in Davos, the 50-year production sharing agreement, reportedly worth $10 billion, will mark the biggest contract yet to tap shale gas in Europe and the largest single foreign investment in the former Soviet republic.
As part of the deal, Shell will sink 15 exploratory wells in the Yuzovska field in an area of 7,000 square kilometres (3,000 square miles), said to Ukraine’s Natural Resources Minister Oleh Proskuryakov, adding that Ukraine could be producing several billion cubic metres of gas per year within 10 to 15 years, which could then rise to 10 to 20 billion cubic metres per year.
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Speaking at the sidelines of the World Economic Forum, Ukrainian President Viktor Yanukovych said the deal was “only the beginning” and vowed:
[quote] From now on we will also be able to find a flexible method of co-operation that will add value to both our countries’ economies. [/quote]
Energy Minister Eduard Stavytsky said earlier Ukraine will be able to completely break its energy dependence on Russia should shale gas production proceed as envisioned under the deal. “If we follow the optimistic scenario, our existing (energy) deficit problems will be solved.”
Russia has for months rejected Ukraine’s pleas for a discount on gas supplies. Under the 10-year deal signed in 2009, Ukraine pays about $430 per 1,000 cubic meters for Russian gas – a price which Kiev says is too exorbitant and stifling its economy.
[quote] Moscow has increasingly used the issue to step up pressure on Ukraine to join a post-Soviet Customs Union but Yanukovych has so far brushed off Moscow’s advances, saying he is committed to integration with the European Union. [/quote]
Clashes between Kiev and Moscow sparked serious disruptions to Russian gas flows via Ukraine in 2006 and 2009, with EU members Bulgaria and Slovakia left without energy during a bitter winter.
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Signing an active Shell drilling contract is thus a potential boon for Ukraine, which is thought to have one of Europe’s largest shale gas reserves at 42 trillion cubic feet (1.2 trillion cubic meters). And though the process of hydraulic fracking is controversial, because of the potential environmental effects, Ukraine is more politically receptive to it than some other countries.
Ukraine “might even go into surplus,” Stavytsky said.
