Bloomberg News

Ukraine to Auction Production Stakes in Two Natural Gas Fields

February 24, 2012

Feb. 24 (Bloomberg) -- Ukraine plans to auction the rights to as much as 70 percent of production at two natural-gas deposits as it seeks to cut reliance on Russian imports.

“The tender will take place by April 23,” Maryna Pekarchuk, a spokeswoman for the State Geology and Resources Service, said by telephone. “We expect big international companies to participate.”

Exxon Mobil Corp. and Royal Dutch Shell Plc are among companies searching for shale gas in Ukraine, which has Europe’s fourth-largest deposits of the so-called unconventional fuel, according to the U.S. Energy Department. The Yuzivska deposit in east Ukraine and Oleska field in the west contain conventional gas, shale gas and other hydrocarbons, according to government decrees dated Nov. 30 and published on the cabinet’s website.

The agreements will last for 50 years and the winners of the auction will receive no more than 70 percent of production with the government getting no less than 15 percent, according to the resolution.

Ukraine’s TOV SPK-Geoservice and state-run PAT NAK Nadra Ukrainy will set up a venture to participate in the production sharing agreements, Pekarchuk said today.

Exxon signed an agreement with Ukraine’s state-run oil and gas company NAK Naftogaz Ukrainy a year ago to cooperate in exploration for unconventional gas. Exxon seeks to estimate potential for shale gas, coal-bed methane, tight gas and other unconventional sources in the country. Shale gas is natural gas produced by injecting water and chemicals into shale rock. Coal- bed methane is extracted from coal seams.

Eni, Cadogan

Eni SpA and Cadogan Petroleum Plc announced plans in November to explore and extract shale gas in western Ukraine, the State Geology and Resources Service said. The companies planned to spend about $55 million exploring for shale gas in the Lviv basin from 2012 through 2015, the Geology and Resource Service said in a statement on its website on Nov. 28.

Shell and Eni have expressed interest in extracting shale gas in Ukraine, Coal and Energy Minister Yuriy Boyko said on Aug. 23. TNK-BP plans to bid for Ukrainian shale gas licenses and will use BP Plc’s technology to tap deposits, Didier Casimiro, who heads its Ukraine operations, said in June.

Ukraine holds 42 trillion cubic feet of shale gas, the Energy Department’s Energy Information Administration said in April. The country consumed 1.88 trillion cubic feet of gas in 2010, most of which was imported from Russia, according to the EIA.

--With assistance from Stephen Bierman in Moscow. Editors: Rob Verdonck, Torrey Clark

To contact the reporters on this story: Kateryna Choursina in Moscow at kchoursina@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net


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