Ukraine’s shale hopes are now closer to fruition, as deputies of the Donetsk regional council approved a deal with Royal Dutch Shell (NYSE: RDS.A), under which Shell and the Ukraine will develop the Yuzivska shale gas field.
Shell was picked as a possible partner last May, but approval has only just gone through.
U.S. Energy Information Administration estimates show the Ukraine may have the third-biggest shale gas reserves in all Europe – at some 42 trillion cubic feet – just after France and Norway.
“If exploration is successful in the Yuzivska area, we will be able to produce a few billion cubic metres (bcm) of gas per year in just five-six years and eight to 10 bcm in 10 years,” Environment and Natural Resources Minister Oleh Proskuryakov told the council.
“At its peak, in 13-15 years, annual production may exceed 20 bcm. This will not only strengthen our energy independence but will also significantly reduce gas prices.”
It’d also mean much-needed independence from Russia. Presently, Ukraine coughs up $430 per thousand cubic meters to buy gas from Russia under a 10-year deal that was signed in 2009 by the former Ukrainian government. Kiev has been complaining about what it thinks is a steep price for a good while. But Russia, of course, has not reduced it.
The deal, which could be worth anywhere from $10 billion to $50 billion, should be wrapped up by May this year, and Shell has so far not commented on any specifics.
Ukraine also tapped Chevron (NYSE: CVX) to develop shale gas in Olesska, in the west of the country, last May. So far, no final contract has been signed.