Unconventional Gas would Strengthen Ukraine
Viktor Tkachuk has written an opinion piece in the Kyiv Post in response to growing interest by multi national companies in the development of shale gas and coal-bed methane in Ukraine.
Mr. Tkachuk is Chief Executive Officer of the People First Foundation, which seeks to strengthen Ukrainian democracy.
One has to ask the question why in a country so rich in natural gas is so little done to extract it and so much of Ukrainian independence subjugated to Russia in return for their exports. According to Ukrainian and international energy industry experts Ukraine is sitting on top of between 2 to 30 trillion cubic meters of shale gas, up to 13 trillion cubic meters of coal bed methane, 1.98 trillion cubic metres of natural gas and inestimable trillions of cubic metres of gas from the Black Sea shelf.
Simply doing the math, Ukraine could be sitting on between 17 and 45 trillion cubic meters of gas deposits and that’s without the possible reserves in the Black Sea. Ukraine currently uses around 50 billion cubic meters a year. So, on a worst-case scenario, Ukraine has enough gas for the next 340 years without importing any gas from abroad. Harnessing this power would not only create literally thousands of new jobs, it could also reduce the cost of gas in Ukraine by up to 50 percent, making Ukrainian industry much more cost efficient and guaranteeing no more winter blackouts for Ukraine or the European Union.
It is estimated that the savings could be as high as $7.5 billion a year and that would repay the World Bank, the International Monetary Fund and clear the entire national debt in around five years. So why have successive governments demonstrated such a lack of transparency in this area and stalled virtually all development of the Ukrainian gas fields? It cannot be lack of cash, as the Western energy companies are lining up to invest in such rich opportunities. Perhaps now we have the answer as to why Gazprom is offering the hand of marriage to Cinderella Naftogaz. Clearly, competition would not be in Gazprom’s interests.
Multi-national energy corporations including Shell, ExxonMobil and Total have expressed their interest in developing Ukrainian reserves of shale gas and coal bed methane.
However, in order for these companies to begin activity in Ukraine, they are proposing that the government modify current rules for shale gas and coal gas methane production, including an extension of license terms and the introduction of tax incentives.
Speaking at the recent Global Shale Gas Forum in Berlin, Wolfgang Rauball, CEO & Chairman Chief Geologist, Eastern Europe for EuroGas, Inc. said of Ukraine that ” the present business climate lacks transparency.”
Rauball’s company, which is pledging a long-term commitment to the Silurian shale basin in eastern Ukraine, is deferring its choice of a joint venture partner, pending movement by the Ukrainian government.
“Lousy domestic policy remains the single greatest impediment to gas investments in Ukraine,” said Edward Chow, a senior fellow in the energy and national security program of the Center for Strategic and International Studies in Washington.
Smaller foreign players often complained about official pressure on their companies, ranging from price ceilings on gas sales to their licenses being challenged in court. Even larger players, such as Houston-based Marathon, the fourth-largest U.S. integrated oil and gas company, closed up shop in Ukraine in mid-2008.
Ukraine, seriously disadvantaged in its present gas supply talks with Russia, would be well advised to act a bit quicker to allow itself the options and opportunity provided by unconventional gas resources.
Source: Kyiv Post