Ukraine opens shale gas reserves to exploration

Ukraine has become the latest European country to open up its shale gas reserves to exploration, a move that could help to reduce its heavy dependence on increasingly expensive gas imports from its eastern neighbour Russia.

The Ukrainian government said it would hold two tenders for rights to explore for unconventional gas in two vast areas, one in the east of the country and the other in the west.

Bloomberg reports that the winners of the tenders will win the right to sign production-sharing agreements for both shale and traditional natural gas, as well as coal bed methane, crude oil and condensate. The tenders could bring in billions of dollars of much needed investment to Ukraine’s fragile economy.

Ukraine is one of a number of European countries eager to replicate the shale gas revolution that has transformed the energy landscape of the US.

A recent report by the US Energy Information Administration estimated that Europe had 639trn cubic feet of technically recoverable shale gas resources – not far off the US’s 862 tcf.

Poland has the biggest endowment of shale gas, and majors such as Chevron and Exxon Mobil are already drilling there.

Some international oil companies have already dipped their toe in Ukrainian waters. Last June, BP’s Russian joint venture TNK-BP said it planned to invest $1.8bn in six Ukrainian shale deposits over the next six to seven years.

The shale gas tenders come as Ukraine’s fragile economy struggles to break its dependence on imports of Russian gas. Kiev has been pushing hard to negotiate lower import prices, and Russia’s gas export monopoly Gazprom has said it will do so only if Kiev relinquishes control over its vast gas transit pipeline system, which currently handles the bulk of Russian exports to Europe.

In a statement on Thursday, the American Chamber of Commerce in Ukraine praised the government’s decision to proceed with the tenders, predicting success could bring the nation “multi-billion dollar investments” and serve as an effective mechanism for achieving the government’s goal of “energy independence”.

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