Shell, Chevron Win Ukraine Shale Gas Deals

Two of the world’s largest oil companies, Royal Dutch Shell  and Chevron, obtained the right to develop Ukrainian shale gas fields Yuzivske and Oleske, informed Prime Minister of Ukraine Mykola Azarov in his interview with Euronews.

The fields are expected to provide Ukraine with up to ten percent of domestically consumed natural gas by 2020.

The estimated investment in the fields will amount to at least USD 370 million, with the number growing significantly should the gas reserves prove to be commercially viable. Notably, Ukraine exempted companies that would produce shale gas in the country from equipment import tax and shale gas export duty.

Industrial extraction of gas at the sites will begin in 2018-2019. Ukrainian state geological service estimated the amount of both conventional and unconventional, as well as condensed gas deposits at the 6,000 square kilometer Oleske at three trillion cubic meters. As for the Yuzivske field, it may offer up to four trillion cubic meters of gas.

Ukraine announced the public bid for the development of the prospective seven trillion cubic meters of gas in the fields in February 2012. Exxon Mobil, Shell, and TNK-BP placed their bids for the right to develop the Yuzivske field in eastern Ukraine (Donetsk oblast), while Chevron and Eni competed for the right to establish gas production at Oleske, Lviv region.

The U.S. Energy Information Administration assessed the total of Ukrainian gas resources at 1.2 trillion cubic meters. This secures Ukraine the third spot among the European countries (after France and Norway) that have largest shale gas reserves, reported Reuters.

Ukraine began reforming its energy system, adopting the State Program on Energy Efficiency 2010-2015. According to the document, Ukraine will reduce domestic energy consumption through increasing energy efficiency, as well as developing domestic gas reserves, introducing green energy production technology, and diversifying gas export.

Previously, the Minister of Energy and Coal Industry of Ukraine, Yuriy Boyko, stated that Ukraine planned to set up domestic shale gas extraction in five years. Comparatively, it took the U.S. 20 years to accomplish a similar goal. By 2020, Ukraine plans to extract four to five billion cubic meters of shale gas annually. The country prospects to consume 53.7 billion cubic meters of gas with 26 billion of total domestic consumption.

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LNG World News Staff, May 15, 2012