Vitol Group is the last big international energy company with extraction projects in Ukraine after Royal Dutch Shell and Chevron cancelled their shale gas production-sharing agreements.
The Rotterdam-based company entered Ukraine in
August 2012 through a joint venture with Geo-Alliance, co-owned by billionaire
Victor Pinchuk’s EastOne. It produces natural gas that it sells mainly to local
industrial consumers and currently drills “two to three wells in Poltava Oblast”
and has 15 licenses covering approximately 1,000 square kilometers, according to Vitol
CEO Ian Taylor.
Speaking to the Kyiv Post at the 12th
annual Yalta European Strategy conference in Kyiv, Taylor said Ukraine has “significant
gas yet to be discovered.”
“There is a lot of hydrocarbons here. Ukraine
could be a place where you could frack (hydraulic fracturing to capture gas).
It’s got similar (conditions) to what is happening in the United States,” he
said.
He praised the current government for “generally
making steps in the right direction and for having the intention of joining the
European Union’s energy market.
“That would
be better, using Ukraine’s (vast) storage (facilities), Ukraine’s pipelines
would be helpful to Europe. Ukraine then could get cheaper gas as a result,” he
said. “We see Ukraine being useful and a very important part of the whole
energy mix in Europe. We tend to look at the world as sort of as one big energy
platform. We’d like to see free movement of commodities across boundaries
through pipelines on an open transparent basis. That’ the best way possible of getting the best price for energy, which is what we’re trying to deliver to
the customer.”
What’s
holding Vitol and other energy groups back in Ukraine partly are “punitive” taxes, “artificial”
prices being regulated and gas prices falling globally, according to Taylor.
“So we’ve
got to see changes come through and if they do then yes I don’t see any reason
why, if it’s attractive to investment we will, we’re not gun shy in that sense,”
he said, adding that Vitol would consider investing to upgrade Ukraine’s vast
Soviet-era pipeline and gas storage facilities.
“It just
hasn’t been the right framework though to encourage investment. You could see
Shell, Chevron, they’ve all pulled out,” Taylor said. “That’s not good. I think
the government begins to see this now and hopefully it will change to a more constructive
position.”
With winter
approaching and Ukraine trying to get enough gas stored before the heating
season starts, Taylor said the government should “encourage people like us and
others, bluntly, to invest here.”
Under the
current conditions, Vitol is having a “difficult time…we’re losing money, you’ve
got to have a fair balance,” Taylor said. Getting credit is also difficult, as
well as getting paid is not easy, he added.
“But the
story of Vitol is we take a very long-term view. Ukraine could be a substantial
independently successful energy producer,” Taylor said.
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
