Royal Dutch Shell plc has clinched a production sharing agreement in Ukraine to explore shale gas deposits in the Yuzivske gas field, which may evolve into the “largest investment in Ukrainian history,” according to the nation’s energy minister.
The oil major agreed to provide 31-60% of the extracted unconventional gas from the field to Ukraine’s Donetsk and Kharkiv regional administrations. The producer and Ukraine have been negotiating a production agreement since 2011 (see Shale Daily, Sept. 1, 2011).
“Shell’s basic scenario would be investing more than US$10 billion,” and as much as $50 billion in an “optimistic scenario,” said Environment and Natural Resources Minister Oleh Proskuryakov. The project’s initial phase would include an investment of about $140 million.
In five to six years the ministry has estimated that the volume of gas to be extracted from the field “could reach several billion cubic meters [Bcm], while in a decade the annual amount of extracted gas could go up to at least 8-10 Bcm,” or around 282-353 Bcf.
The estimated gas field reserves in the Donetsk and Kharkiv regions equal about 2 trillion cubic meters, or 70.6 Tcf, according to initial estimates.
Extracting new gas supplies would help to reduce prices in the country, said Proskuryakov. He pointed to the United States, where he said gas prices had fallen as shale gas was produced.
“While Ukraine currently pays US$15.53/Mcf of Russian gas, the U.S. managed to reduce the gas price…thanks to the new technology for gas extraction from unconventional sources.”
Shell won the bid to explore for shale gas in the Yuzivske gas field last May. At that time, Chevron Corp. obtained the right to develop gas deposits at the Ukraine’s Oleske gas field in the Lviv region, which may contain an estimated 53 Tcf.
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