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Ukraine, Chevron to sign shale gas project agreement in March: minister

Kiev (Platts)--3 Feb 2014 931 am EST/1431 GMT


Ukraine and Chevron will sign an operational agreement in March that should see the US major start work on shale gas extraction in the country, acting Energy and Coal Industry Minister Eduard Stavytskiy said Saturday.

"We have worked out the agreement and will sign it in March," Stavytskiy said at a press conference. "I hope that we will complete this work in the first quarter." Ukraine and Chevron signed a production sharing agreement, or PSA, in November 2013, paving the way for a $10 billion shale gas development project in regions bordering the European Union.

The agreement, which follows a similar deal signed with Shell in January 2013, is seen as improving the country's energy security and potentially reducing dependence on imports of natural gas from Russia.

Government work has been disrupted over the last couple of months due to massive street protests in Ukraine after President Viktor Yanukovych decided to change the country's foreign policy direction away from closer integration with the EU and towards closer ties with Russia.

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Prime Minister Mykola Azarov resigned last week, triggering a reshuffle of the entire government. Stavytskiy, as well as other government ministers, will be acting ministers until the new government is formed.

'CONFIRMED COMMITMENTS'

Stavytskiy said the protests and the government reshuffle had no impact on its cooperation with Chevron.

"We are in close contact with our strategic investors," Stavytskiy said. "The company's officials are in Ukraine. Nobody has left the country in connection with these events. All have confirmed their commitments."

The PSA with Chevron covers the Olesska shale gas deposit, which extends through the Ivano-Frankivsk and Lviv regions bordering the EU.

The PSA covers a term of up to 50 years, with the initial five years devoted to an exploration phase focused on acquiring seismic data and the drilling of exploration wells, Chevron said.

The government estimates that the Olesska deposit contains almost 3 trillion cubic meters of shale gas, with likely production of 8-10 billion cubic meters/year.

Chevron, as operator, will work together with Nadra Olesska, a joint venture in which state-owned resources company Nadra Ukrayiny holds 90%.

SPK-Geoservice, a small private Ukrainian company, owns the remaining 10% in the venture.

Ukraine has Europe's fourth-largest shale gas reserves, according to the US Energy Information Administration.

--Alexander Bor, newsdesk@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com

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