Ukraine plans to reduce Russian influence with shale gas deal

The Ukrainian government is hoping to secure more energy independence from Russia, through signing a $10bn deal with Royal Dutch Shell (LSE:à‚ RDSA) to exploit shale gas fields within its borders.

Ukraine is estimated to hold Europe’s third largest shale gas reserves and the production sharing agreement is seen a as a way of escaping the grip of Gazprom. Twice in the last six years Russia has cut off gas to Ukraine in midwinter as the result of pricing disputes.
Eduard Stavytsky
Eduard Stavytsky, Ukraine’s newly appointed energy minister, told the Financial Times: “If the geology turns out as expected, we expect at least $10bn to be invested.”

The FT reports that although Ukraine will remain dependent on Russian imports for some years, the prospective shale gas production will strengthen its hand in continuing efforts to renegotiate a 10-year, 2009 supply contract with Gazprom. Kiev says that it set an unfairly high price.

“If our Russian colleagues at Gazprom do not agree to lower gas prices, they risk losing their biggest customer,” Mr Stavytsky said.

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