Ukrainian vice prime minister touts oil and gas opportunities
KURT ABRAHAM, Executive Editor
HOUSTON -- In a recent visit, Ukrainian Vice Prime Minister Yuriy Boyko made it clear that his country intends to wean itself away from Russian natural gas imports as quickly as possible. As part of a comprehensive plan to achieve that goal, the country has encouraged companies, both domestic and foreign, to invest in Ukrainian E&P projects. “We have taken steps to invite companies, particularly American and European, to invest in Ukraine,” said Boyko.
Indeed, in August 2012, an ExxonMobil-led consortium won the tender for the Skifska Block in the Black Sea, totaling 1.65 million net acres (ExxonMobil interest, 40%). The company and its co-venturers have been working with the Ukrainian government to finalize the production sharing agreement. Also, in 2012, Chevron successfully bid for the right to exclusively negotiate a 50-year PSC with the government of Ukraine for the Oleska Block in western Ukraine. Chevron was expected to operate and hold a 50% interest in the 1.6-million-acre concession. Earlier this year, the PSC and joint operating agreement terms were being negotiated.
In addition, Ukraine has significant shale gas resources, and negotiations have been held with several operators. For instance, Shell last January agreed to explore an area in which the government estimates there are 4 Tcf of shale gas reserves. Current plans include development of shale gas resources for domestic consumption and exports to Western Europe by 2020. “America has made a shale gas revolution, and the same goal is our Ukrainian policy,” said Boyko.
“As Texas was the father of the modern U.S. oil industry, so Ukraine was the mother of the gas industry in the Soviet Union in the 1970s,” continued Boyko. “Ukraine was the center of Soviet gas until it was moved to Siberia.” And therein lies the problem, claims the vice prime minister. As time went by, more and more gas was produced in Siberia, instead of Ukraine, and the latter republic of the Soviet Union, later an independent country, became dependent on Russian imports for 70% of its natural gas supply. “Gazprom sells gas to us at three times what it costs in America,” explained Boyko, “and this equates to about $11.50/Btu, and it kills our economy. So, the more gas that we produce ourselves, the less that we have to import from Gazprom. We want to avoid gas dependence, so we are also very strong with coal and the nuclear sector, and we are also establishing solar and wind stations.”
Boyko said that oil usage in Ukraine is growing at a rate of about 2% to 3%, annually, but that natural gas consumption is static. This is due, in part, to a deliberate strategy of encouraging more generation of electricity with coal, nuclear, solar and wind sources. “We produce approximately 52 Bcm of gas (5.03 Bcfgd) and 4 MMt of crude (about 80,000 bopd) annually,” noted Boyko. “However, we need an additional 11 MMt (219,000 bopd) of crude and and 50 Bcm of gas (4.84 Bcfgd). We have 10,000 old drillings (wells) that were stopped (made inactive) in the 1970s, but today, if we use new technologies, we can make those wells active again.”