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№ 7 (July - August 2010)

Shell Seeks To Ease Ukrainian Shale Gas Legislation To Promote Production

Shell will ask the Ukrainian Fuel and Energy Ministry to change legislation regarding shale gas production, Kommersant Ukrayina reports. During a roundtable entitled "The Prospects for Shale Gas Development in Ukraine" held in Kiev on August 12, Aleksey Tatarenko, Shell's liaison with government officials in Ukraine, stated Shell intended to invest in the segment if bigger areas are offered for production and license periods are lengthened and tax breaks introduced.


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Ukrainian government officials have said they are prepared to initiate these changes.
On July 2 this year, Ukrainian Deputy Prime Minister Andrey Klyuyev said the government felt the issue of alternative gas holds prospects, specifically, shale gas in Ukraine. He said that despite the fact production costs of shale were higher than for traditional gas, it was still a very promising field.
Before that, on June 11, Klyuyev said the Ukrainian government planned to double domestic gas production over the next 10 years to 40 billion cubic meters of gas a year. Specifically, he said Ukraine hoped to attract large investors "like Shell and Chevron".
Klyuyev also said Ukraine has one of the biggest shale fields in the world and noted the government had already been negotiating with companies on the topic.

Meanwhile, the director of the Horeshenin Institute of Management, Vladimir Fesenko, said the issue of beginning to explore and develop shale gas in Ukraine would only be possible if reforms in the country were carried out, including in the state oil and gas company Naftohaz Ukrayiny.
Fesenko said, "The problem of shale gas is one with promise, but not one for today, that would solve all our gas problems today. It is an issue for the mid- and long-term".
He added, "In order to solve the problem, work must begin today and it must be a serious government program, in order to not repeat the sad story of the program on coal methane gas".
"The problem of shale gas can only be solved in the context of energy sector reforms and reforming Naftohaz", Fesenko said.
Moreover, he said, "We need to solve two problems in order to solve the problem of shale gas: serious investment, and for that we need stimuli. And in order for there to be tax breaks or investment, we need serious legislation and, importantly, there should be political will from the government".
"If we truly want to achieve energy independence, then we need to get involved in energy conservation and develop non-traditional gas and provide the legal political and administrative stimulus and economic stimulus. If that does not happen, the resource will not work", Fesenko said.
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