Shale Gas in Ukraine: It Exists, but...
It was it at the highly publicized World Economic Forum in Davos, Switzerland, that Royal Dutch Shell chose as the site of the official signing of a shale gas exploration and development deal with Ukraine.
"Can it be commercialized?" was the question posed to delegates at Shale Gas World by Lyubomyr Goncharuk, First Deputy Head, State Service for Geology and Mineral Resources of Ukraine.
He started by showing delegates a map of Ukraine's to main geographies for hydrocarbons: western Ukraine - quite close to Poland and Romania, and north-eastern Ukraine.
Mr. Goncharuk showed the three main unconventional gas provinces in Ukraine, explaining that in terms of geology, it was mainly Devonian and quite deep, between 4-6,000 meters.
"Our experts strongly believe that gas exists. There's only one question - how can be commercialized, put into production."
Explaining that national joint stock company, Nadra Ukrayny NJSC, had made cooperation with numerous IOCs, Mr. Goncharuk outlined one of the options for cooperation between IOCs and Ukraine: production sharing agreements, which had been lengthened to 50 years.
He added, "In Jan 2015 will also have some improvements to taxation, simplifying and making them more understandable. Instead of several taxes, you will only have one."
The second option, he said, was the foundation of a joint venture; the third, direct investment into Nadra directly.
Goncharuk reported that more than 3,000 miles of concessions were awarded to Shell in eastern Ukraine and over 2,500 square miles of western Ukraine had been granted to Chevron. He commented, "These are big, huge territories. Historically, these provinces have always been exploited and explored for hydrocarbons, so we do believe that such projects could be very attractive."
He said that it required a huge amount of investment, and a lot of negotiation was required for tenders. "Now they're in the process of negotiating with Ukrainian government, and according to legislation they should be able to finish the processing of this deal in the first half of 2013. When everything is signed, the engine will switch on."
Another license of similar size was set to be announced in 2013, Mr. Goncharuk said.
He said that an example of effective cooperation was ENI Group's signing of a purchase share agreement with Nadra Ukrayny which was signed in June 2012 and the deal was close at the beginning of October 2012, showing that things could move swiftly for potential investors.
It was possible, he said, to directly work with any one of Nadra Ukrayny's 48 subsidiaries.
"We are looking forward with quite optimistic positions. Only some test drilling can show us how close we are to our expectations. We do believe the possibility is huge and our history shows that it's possible to grow," said Goncharuk.
"Five years ago, we supplied gas from Ukraine to Moscow; now we do it vice versa. In the late 1970s it was decided to make investments in Siberia, not Ukraine. Now we're trying to recover our oil and gas industry and we have everything to do," he concluded.