Ukraine to launch shale gas production by 2017

Ukraine will launch the production of shale gas, seen as an alternative to Russian natural gas, by 2017, Environment and Natural Resources Minister Eduard Stavitsky said on Wednesday. On May 10, a Ukraine government commission awarded global energy companies Shell and Chevron the development tender for the Yuzovsky shale gas deposit, in the Kharkov and Donetsk Region in eastern Ukraine, and the Olessky field, in the Lvov and Ivano-Frankovsk Regions in the west of the country. The other tender bidders included Italy’s Eni, U.S. major ExxonMobil and the Russian-British oil joint venture TNK-BP. Ukraine is pinning great hopes on shale gas production with geological data suggesting that Ukraine boasts Europe’s largest shale gas reserves, and is likely to produce from 7 to 10 billion cubic meters annually in five to seven years. Exploration drilling at the Yuzovsky block, with estimated reserves of over 4 trillion cubic meters, is expected to start in 2013, and production at the field may commence in 2015. Drilling at the Olessky block, with estimated reserves of 2.98 trillion cubic meters is scheduled to begin in 2014, with production commencing in 2016, the minister said. Ukraine has long been seeking to alter the terms of the 2009 gas deal it signed with Russia. The deal ties the price of gas to oil prices, which have risen strongly since 2009, increasing Ukraine's gas bill. Ukraine will have to pay $416 per cubic meter of Russian gas in 2012, and is insisting the price and contracted volume of its gas imports should be reduced.