Gas in Ukraine: Always Important, and Now...

Natural gas has always been and will continue to remain one of the pillars of the National Energy Strategy of Ukraine, according to Graham Tiley, Country Chairman, Shell Ukraine, in his appearance at the Ukrainian Energy Forum.

Gas, he said, had never been so important and is now poised to play an even more important role in the global energy picture going forward in the context of the "natural gas revolution."

"Its supply is increasingly abundant and diverse, which means greater energy security, not just for individual countries but for the globe as a whole."

That point, of course, has been underlined by Shell's recent $10 billion shale gas deal in Ukraine, a 50-year production sharing agreement (PSA).

Mr. Tiley noted that the International Energy Agency estimated the total worldwide recoverable gas resources at around 250 years of current production rates. "And I think Ukraine is very much in line with this global shift to gas. As many of you are aware, natural gas already plays a significant role in Ukraine's energy balance; it meets the needs of about 40% of Ukraine's economy.

"But at the same time, Ukraine's own domestic gas resources - the conventional gas resources - have been largely developed, and conventional gas production is in decline. Put simply, the 'easy gas' is gone and if domestic gas is going to remain an important part of Ukraine's energy balance, then it needs to come from other sources such as tight gas, shale gas or from the deepwater of the Black Sea," he stated.

"To unlock these resources safely and successfully, then new technologies, the global expertise of international companies and long-term investment will be required."

He recalled that 2012 had been a very exciting year for the natural gas industry in Ukraine, with a number of significant developments.

"For Shell, together with our partner, we have started drilling our first exploration well in the Kharkiv oblast, an event that was witness by the President. We became part of the group of investors that is now looking to develop they hydrocarbons in the deepwater of the Black Sea, and of course something we are extremely proud of: we signed the PSA for the Yuzivska, a contract that the media have labeled landmark 'a landmark deal' for Ukraine," explained Mr. Tiley, who said the milestone had attracted a lot of public interest.

"Environmental groups are particularly vocal concerning potential environmental effects of developing these gas resources, and unfortunately it's a lot easier to spread myths than it is sometimes to spread facts. This has led to a lot of misconceptions around the impact of hydraulic fracturing, which in fact is a technique that has been used many years in many countries, including here in Ukraine."

He said that Shell understood those concerns.

He stated: "We are confident that open and transparent dialogue, underpinned by our highest operating standards, will help turn those who are today skeptics into supporters, because we at Shell are convinced that natural gas exploration and production should and can occur in an environmentally safe manner; anything less is actually unacceptable to us."

According to him, Shell had been successfully developing such projects in North America, and increasingly in new countries like China. "These countries can help showcase benefits that such projects bring," he explained. "In the US alone the unconventionals gas industry provides jobs for more than a million people."

Furthermore, he said that various reports had shown the commercial development of unconventional gas projects led to large and widespread socio-economic benefits through taxation, direct contributions to GDP and the creation of a whole new series of service industries.

"Of course Ukraine is just at the beginning of this path - were only at the exploration phase of our project - but the opportunity is, frankly very exciting, thrilling, and in our belief it's well worth exploring. This is what Shell is here to do."

"As an explorer myself, I'm very much excited to see what 2030 will bring, and hope to see some new projects signed, some new companies involved. More importantly, I'm hoping to see some early results from our operations that will give the indications of Ukraine's potential. I'm glad to be in Ukraine at such an exciting time. Let's see what's ahead of us," suggested Shell's Graham Tiley.