Anglo-Dutch giant is teaming up with Naftogaz to plumb Dnipro-Donets Basin field
Anglo-Dutch energy giant Shell intends to invest $ 100 million into developing the Dnipro-Donets Basin gas field over the next three years, a move that government welcomes as it tries to diversify Ukraine’s energy supply.
During a Dec. 1 meeting in Kyiv between President Viktor Yushchenko and British Prime Minister Tony Blair, state oil company Naftogaz Ukrainy and Shell Exploration and Production signed a cooperation agreement covering licenses and joint activity.
The agreement followed the two companies’ May 2005 decision to search over 31,000 square km in the Dnipro-Donets basin, which supplies Ukraine with 80 percent of its hydrocarbons, for new gas deposits. The gas field is believed to contain natural gas deposits deep below those currently being exploited.
Under the terms of the cooperation agreement, Shell will obtain 10 licenses from Naftogaz to access the potential reservoirs, which lie partly beneath shallower fields already tapped.
Shell will acquire a 50 percent interest in a joint activity agreement covering these licenses (excluding the producing fields) in exchange for a commitment to acquire seismic data and to drill deep exploration wells over a three-year timeframe.
The project involves a total initial investment by Shell of around $100 million. Work is scheduled to start in 2006.
Malcolm Brinded, Shell’s executive director for exploration and production, said in a statement that the company believes the partnership will be “exciting and mutually beneficial.”
“For Shell this is a significant move in our strategy to add more integrated gas to our portfolio, and we believe that through a combination of our technology and Naftogaz Ukrainy’s experience in this basin we will be able to help unlock more of Ukraine’s gas resources for the benefit of the country,” the statement said.
Volodymyr Saprykin, an expert at the Razumkov Center, said that Shell’s shift to active cooperation with Naftogaz shows the increasing confidence in Ukraine’s political stability. He added that the investment of $100 million is a big sum, but not striking for the gas industry.
Saprykin said that the project is unlikely to save Ukraine from its dependence on Russian oil, as the fields won’t yield much gas. He added that any attempts to diversify the country’s energy supply are good for Ukraine.
The new agreement is part of the Fuel and Energy Ministry’s ambitious plan decrease dependency on gas imports by increasing domestic gas production to about 37.6 billion cubic meters before 2030.Ukraine depends on foreign gas for three-fourths of its consumption.
