Shell to seal vast shale gas

Ukraine and the global giant Royal Dutch Shell will on Thursday sign a shale gas production sharing agreement that will help the ex-Soviet nation ease dependence on neighbouring Russia, officials said. The deal will be signed in the presence of President Viktor Yanukovych and top Shell executives on the sidelines of the World Economic Forum in Davos, the Ukrainian leader's office said without providing details. The Ukrainian government estimates the eastern Donetsk location may hold three trillion cubic metres (100 trillion cubic feet) of natural gas -- enough to last the nation of 46 million 70 years at current consumption rates. The Shell deal comes amid an upsurge of foreign interest in Ukrainian shale -- developed through a controversial process known as fracking -- after the industry took off in North America. Some forecasts suggest that Ukraine alongside countries such as France and Poland may hold some of Europe's largest shale rock deposits. Other Western majors testing the Ukrainian market include the US firms Chevron. ExxonMobil meanwhile for searching for deposits in sections of the Black Sea. The Kiev edition of the Kommersant business daily said the deal will see Shell hand over to Ukraine 31 percent of the produced gas until the project's breakeven point. The report said the Ukrainian government would control 60 percent of production at its peak. Natural Resources Minister Oleg Proskuryakov told the paper that investments would reach "tens of billions of dollars" and production would reach 10-20 billion cubic metres per year in 10 to 15 years. Ukraine lacks the technology to reach the deep-buried shale rock holding the gas and continues to rely heavily on gas imports from its eastern neighbour Russia. It hopes to renegotiate the terms of a 10-year 2009 gas deal with Russia that sets much higher purchase prices. But Moscow has set Ukraine's membership in a loose Moscow-led trade body and as a precondition and also wants partial ownership of Ukraine gas pipeline and distribution network. No deal has been reached despite more than two years of talks.