Shale Gas Production: Dutch Yuzgas to Replace Shell in Ukraine

July 28, 2016

"Yuzgas B.V. has won the tender to implement a Production Sharing Agreement (PSA) on the Yuzivska field," according to the press service of NJSC Nadra Ukrainy, whose subsidiary Nadra Yuzivska is the field's owner. Nadra Yuzivska was created to undertake a project for the prospecting and production of hydrocarbons under the PSA on the Yuzivska field. The PSA on this field was signed in January 2013 by the then government, Royal Dutch Shell and Nadra Yuzivska.

Gas production in Ukraine is expected to double if the project is successful. Read also Ukraine sees decline in oil and gas condensate production since start of year "Shell invested some dozen million dollars in prospecting, but following drastic changes in the circumstances of the execution of the project, it withdrew from the PSA on September 8, 2015," the company stated. A new open tender was then called to find a new investor. The procedure, terms of the tender and the tender committee were determined by the interdepartmental commission for PSA implementation, the Cabinet of Ministers and Nadra Yuzivska. "The criteria for the selection of the winner were tested during tenders to find investors for the Oleske (in Lviv region in western Ukraine) and Yuzivska fields, whose bidders were international oil and gas companies such as U.S. ExxonMobil, U.S. Chevron, Royal Dutch Shell and Italian Eni," the state company said. Dutch Yuzgas, which made the highest bid for the Yuzivska project, was named the winner of the latest tender. Read also ExxonMobil Exploration and Production Ukraine closes its Kyiv office The tender committee considering the bids comprised heads of the respective ministries, Nadra Ukrainy, Nadra Yuzivska, and members of parliament.

"Because of a decline in world prices of crude oil, Ukraine has considerably reduced hydrocarbons prospecting. Therefore, it is important that the winner of the tender invest several dozen million dollars in the program for prospecting the Yuzivska field (close to the amount offered for drilling by Royal Dutch Shell in 2012) and pay commercial discovery and production bonuses to the national budget," Nadra Ukrainy declared. Yuzgas is expected to become a full-fledged participant in the PSA after endorsement by the Cabinet. It is also reported that according to a decision taken by an extraordinary meeting of shareholders of Nadra Yuzivska, dated October 23, 2015, SPK-Geoservice undertook to withdraw from Nadra Yuzivska's shareholders. Thus, NJSC Nadra Ukrainy will be the sole participant in Nadra Yuzivska from the beginning of August.

As UNIAN reported, the Ukrainian government, Royal Dutch Shell and Nadra Yuzivska on January 24, 2013, signed a PSA on the Yuzivska field in Kharkiv and Donetsk regions. Currently, Nadra Ukrainy owns 90% of Nadra Yuzivska, while 10% belongs to little known SPK-Geoservice, which is allegedly connected with the Yanukovych family. Royal Dutch Shell began the development of shale gas deposits in Kharkiv and Donetsk regions, but in June decided to withdraw from the project, which was in October confirmed by then Energy and Coal Industry Minister Volodymyr Demchyshyn. UNIAN's memo. National joint-stock company