Fast Market Research recommends "Ukraine Oil & Gas Report Q1 2014" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 01/02/2014 -- A second major shale gas deal in Ukraine, to be signed by Chevron, confirms our cautiously optimistic view regarding momentum building up in the Ukrainian shale gas sector. The deal provides some upside potential in alleviating a part of Ukraine's import burden in the long run. It also shows an increasing commitment by international oil companies to the country's shale gas potential. However, we factor in production from 2018 onwards - a more conservative estimate to the government's 2015 target - and believe that shale gas production is unlikely to significantly overturn Ukraine's heavy dependence on gas imports from Russia. It remains that Ukraine will have to improve energy efficiency in order to reduce the detrimental impact of energy dependence on its economy.
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The main trends and developments we highlight for Ukraine's oil and gas sector are:
- The EIA released new estimates of global technically recoverable shale gas in mid-June 2013. Ukraine appears to be one of the main beneficiaries of this revaluation as the EIA now estimates that the country holds 3.6trn cubic metres (tcm) of unconventional resources.
- The production sharing agreement (PSC) agreement with Chevron will entail an initial investment of US $350mn by Chevron in exploratory work at the Olesska site in western Ukraine.
- Successful completion of a 10-stage hydraulic fracturing (fracking) programme by JKX Oil and Gas and Schlumberger in Q3 put Ukraine on the forefront of exploratory activity outside the United States. However, initial results from the well R-103 in October 2013 came in at the lower end of estimates at 0.3bn cubic metres (bcm)/year and 25 barrels per day (b/d) of condensates. The company is planning a second multi-frac well in its licence area.
- Royal Dutch Shell will spend up to US$10bn in total to develop the Yuzivksa block. The initial stage will see some US$500mn invested in the area with first gas planned for end-2014 according to Ukrainian officials. According to Shell, the Yuzivska block is estimated to contain 3-3.5tcm of gas-in-place. The Anglo-Dutch major is due to target both conventional and unconventional shale and tight gas in the area.
- In August 2012, a consortium consisting of ExxonMobil, Shell, OMV Petrom and Nadra Ukrainy was awarded a 50-year PSC for the deepwater Skifska field, with an estimated 200-250bcm of gas-in-place, in the Black Sea. A PSC for the field is expected to be signed by end-2013.
- In terms of gas supplies and Ukraine's relations with Russia the bilateral relations have grown more tense as Ukraine's association agreement with the EU approaches. In October Gazprom noted that Ukraine had failed to settle payments of US$882mn for gas supplied in August, suggesting that renewed flare-ups in the relations could be likely.
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