Shell, Ukraine Sign Shale Gas Production Sharing Act

The Donetsk and Kharkiv regional administrations voted in favor of the production sharing agreement with the oil and gas company Royal Dutch Shell. The document features ecology, social and other requirements for the investor and regulates the relationship between the investor and the state. According to the agreement, Shell will hand over 31-60 percent of the extracted gas to the Ukrainian state.

The Shell project at the Ukrainian shale gas field Yuzivske has the potential of evolving into the largest investment in Ukrainian history, reckons the Environment and Natural Resources Minister Oleh Proskuryakov. “Shell’s basic scenario would be investing more than USD 10 billion, optimistic scenario – USD 50 billion,” he said. During the initial phase of the project, investments into the Donetsk and Kharkiv region social infrastructure will amount to USD 140 million.

The official also noted that in five to six years the volume of gas extracted at the site in question – Yuzivske shale gas field – could reach several billion cubic meters, while in a decade the annual amount of extracted gas could go up to at least 8-10 billion cubic meters. The estimated gas field reserves in the Donetsk and Kharkiv regions equal 2 trillion cubic meters of the natural resource.

The hydrocarbon extraction at the gas field will allow for lower gas prices, believes the minister. While Ukraine currently pays USD 440-460 dollars per cubic meter of Russian gas, the U.S. managed to reduce the gas price to USD 100 thanks to the new technology for gas extraction from unconventional sources.

Shell won the right to explore shale gas in Yuzivske gas field in May 2012. At the same time, Chevron Corp obtained the right to develop gas deposits at the Oleske gas field in the Lviv region. The field reportedly may contain the total of to 1.5 trillion cubic meters of gas.

Additionally, Shell is one of the four companies to get the right to develop oil and gas reserves at the Ukrainian deep marine shelf field Scythian under the Black Sea. In August 2012, American ExxonMobil, Dutch-British Royal Dutch Shell, Romanian OMV Petrom, and Ukrainian state company Nadra were nominated to unlock the underwater deposits.

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LNG World News Staff, January 18, 2013