New Energy research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 03/04/2013 -- BMI Industry View
BMI View: Seemingly endless gas pricing disputes with Russia colour Ukraine's energy landscape, putting pressure on the country to maximise domestic production and diversify supply sources. Ukraine's vast shale gas potential could prove a long-term solution to its gas supply woes, as international oil companies (IOCs) increase their interest in the country's shale resources. Russia continues to make overtures regarding ownership of Ukrainian gas infrastructure, but these have so far been rejected.
The main trends and developments we highlight for Ukraine's Oil and Gas sector are:
Ukraine is aiming to increase its natural gas production by as much as 25% over the next three years in order to wean itself off costly Russian imports. Prime Minister Mykola Azarov said in November 2012 that the country's shale gas output could reach 20-30bcm per year by 2020.
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Oil majors Royal Dutch Shell and Chevron were the winners of Ukraine's two shale gas fields, tendered in an auction that opened in February 2012, according to Reuters' Ukrainian government source. Shell has been awarded the Yuzivska field and Chevron the Olesska field. Ukraine's State Geological Service estimates that Yuzivska and Olesska could hold 2trn cubic metres (tcm) and 0.8-1.5tcm in gas reserves respectively, a highly optimistic assessment compared with the US Energy Information Administration (EIA)'s estimate of 1.2tcm in recoverable reserves for the whole of Ukraine. Eni also took a stake in Ukraine's emerging shale industry by acquiring a 50.01% stake in LLC Westgasinvest, which holds shale gas licence rights in the Lviv Basin.
In August 2012, a consortium consisting of ExxonMobil, Shell, OMV Petrom and Nadra Ukrainy was awarded a 50-year production sharing contract (PSC) for the deepwater Skifska field, with an estimated 200-250bcm of gas-in-place, in the Black Sea. The group will be expected to begin work on the field before the end of 2012.
BMI estimates that gas demand will rise from an estimated 64.6bcm in 2011 to 73bcm by 2016, climbing above 80bcm by 2021. Production could see a gradual rise from an estimated 20.1bcm in 2012 to 21.7bcm in 2016 as current exploration successes are slowly developed over the period. This will further rise to 26.8bcm by 2021 on the back of the beginning of shale gas output. Growing consumption means that import requirement is still set to rise, from 46.1bcm in 2012 to 55.8bcm by 2021.
Ukraine is planning a liquefied natural gas (LNG) regasification terminal with annual capacity of 10bcm. However, we do not expect it to come online before 2018, although Ukrainian officials are targeting 2015. The government has actively courted Azerbaijan and Qatar for long-term LNG supplies.
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