Royal Dutch Shell announced Nov. 21 it inked a preliminary $410 million agreement to take a 51 percent interest in two Ukrainian natural gas fields
Royal Dutch Shell announced Nov. 21 it inked a preliminary $410 million agreement to take a 51 percent interest in two Ukrainian natural gas fields controlled by a subsidiary of Regal Petroleum, a London-listed gas group.
The signed Memorandum of Understanding (MOU) marks the continued rapid expansion of Shell in Ukraine, which has sought investment and know-how from Western energy majors to break its heavy reliance on Russian fuel imports.
Ukraine imports the lion’s share of its natural gas and oil needs from the Russian Federation and Central Asia, but is believed to be home to vast untapped hydrocarbon reserves of its own.
The agreement envisions Shell taking a 51 percent interest in Jersey-registered Regal Petroleum Limited, a wholly owned subsidiary of Regal Petroleum Plc that indirectly holds licenses for Ukraine’s Mekhediviska-Holotvschinska and Svyrydivske natural gas fields.
“The MOU is another important step in Shell’s development in Ukraine,” said Patrick van Daele, general manager of Shell Ukraine Exploration & Production LLC.
“The growth potential from the Mekhediviska-Holotvschinska and Svyrydivske fields is a clear fit with Shell’s strategy.”
Should the transaction take place, Shell will pay $50 million to Regal for its 51 percent stake. The remaining $360 million will be used to develop the fields.
Shell is the only major global energy company to have moved fast to expand its presence in Ukraine.
It acquired joint exploration and production rights at eight licensed areas in recent years in the potentially large Dnipro-Donetsk Basin, and operates 150 Shell-branded gas stations in Ukraine through a joint venture with Moscow-based Alliance Group.
This week, Shell announced the introduction of a new high-grade fuel that will be made available at the gas stations it operates with Alliance Group.
Ukraine has lured Western energy majors in recent years to develop significant domestic hydrocarbon reserves in the hope of reducing reliance on Russia for fuel imports.
This year, Houston-based Vanco Energy inked a production sharing agreement to explore and produce at a field off Ukraine’s Black Sea coast.
Marathon Oil has recently inked agreements in Ukraine. Brazil’s Petrobras has expressed interest in exploring Ukraine’s Black Sea coast for hydrocarbons.
Regal’s Ukrainian assets have been in the center of legal controversy ever since its former joint venture partner, a Ukrainian government agency, challenged the company’s rights to production sites in Ukraine. The Ukrainian Supreme Court dismissed the claims last December.
Regal’s major assets are in Ukraine, but the company also holds prospective exploration licenses in Romania, Egypt and Liberia, and additionally holds an interest in an oil field investment in Greece.
