Ukraine’s stalled energy projects

Map of Ukraine
Source: DollarPhotoClub

In an opinion piece published today, Platts’ Ukraine correspondent, Alexander Bor, looks at Ukraine’s dwindling shale energy prospects in the face of the current political turmoil.

Although Ukraine has Europe’s third-largest shale gas reserves at 42 trillion cubic feet, according to the U.S. Energy Information Administration, most of these deposits are undeveloped, leaving the country dependent on Russia for energy. Ukraine produced about 20 billion cubic metres of gas in 2013 and imported about 24 billion cubic metres from Russia and about 2 billion cubic metres from Europe.

It is no wonder then, that energy independence has been high on Ukraine’s agenda. In April 2013 Eduard Stavytskiy, then Ukrainian energy and coal industry minister, said that with the help of shale gas and Crimean offshore gas projects, Ukraine could start exports of gas to Europe in four to five years and to become a net energy exporter by 2020. In view of the recent developments in the Ukraine, this target seems unlikely to be achieved.

As Alexander Bor points out, nearly all of the military activities in Ukraine are taking place atop large oil and gas deposits.

Two major energy projects – Skifske, in the Black Sea, and Foroske offshore project in Crimea – have pretty much been abandoned after Russia’s annexation of Crimea in March this year.

The city of Slovyansk, in Ukraine’s Donetsk region, where some of the fiercest fighting between the government’s armed forces and pro-Russian separatists have take place, sits on a huge deposit of shale gas, known as Yuzivska. Located between two eastern regions of Ukraine, Kharkiv and Donetsk, the field is believed to contain up to 4 trillion cu m of shale gas, according to the Ukrainian government.

Needless to say, any exploration of these deposits is out of the question for as long as fighting continues.

“In the context of the conflict between Russia and Ukraine, one can say with high probability that the shale gas project will now be frozen,” Yuriy Korolchuk, the head of the Energy Research Institute, a Kiev-based think tank, said. “Certainly, in this situation Russia wins, remaining nearly a monopoly supplier of gas.”

Unless the Kiev government regains control over Eastern Ukraine and the seceded Crimea – a highly unlikely scenario – the country’s only shale gas project that is likely to stay intact is the Olesska field in the Lviv and Ivano-Frankivsk regions that border Poland. Chevron signed the PSA with the government in November 2013, opening the door for a $10 billion investment in the project that is expected to produce up to 10 billion cu m of gas annually, according to Ukrainian officials.

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