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Ukraine reaches deal for Black Sea gas with Exxon, Shell

Ukraine said Thursday it has reached a natural gas production-sharing agreement with a consortium led by Exxon and Shell, its latest step towards energy diversification and reducing its dependence on Russia.

The consortium, which also includes Romanian energy group Petrom and Ukraine's state-owned Nadra Ukrainy, will extract natural gas on the Skifski site off Ukraine's Black Sea coast.

An initial accord was signed by Ukrainian Energy Minister Eduard Stavytsky and representatives of Exxon, Shell, and Petrom on the sidelines of the UN General Assembly in New York, the Ukrainian presidential press service said.

The sides agreed to sign a formal production-sharing agreement within a month in the Ukrainian capital Kiev.

Skifski, which is located in the northwest part of the Black Sea, near Romania, is expected to provide eight billion to ten billion cubic metres of natural gas per year, Stavytsky said.

The agreement is seen as a further step in Ukraine's aspiration to diversify its energy sources, as the ex-Soviet nation continues to rely heavily on gas imports from its huge eastern neighbour Russia.

It hopes to renegotiate the terms of a 10-year gas deal it signed in 2009 with Moscow that sets high purchase prices.

The Shell/Exxon deal came after recent moves by Ukraine to draw closer to the European Union and away from Russia, which has threatened trade sanctions as it tries to keep Kiev in its zone of influence.

Ukraine is hoping to sign an association agreement with the EU in November, but Moscow is trying to force it to join the Kremlin-led Customs Union with Belarus and Kazakhstan.

Aiming to decrease its fuel dependence, Ukraine is looking for opportunities to boost production of its own gas.

In January, Ukraine and Shell signed a $10-billion shale gas production-sharing agreement.

The Ukrainian government estimates the eastern Donetsk location may hold three trillion cubic metres of natural gas -- enough to last the nation of 46 million people 70 years at current consumption rates.

US energy giant Chevron won a tender last year to explore for shale gas in western Ukraine.

Sept. 26, 2013

Source: Global Post