Ukraine to award first shale gas deal to Shell: official

31st August 2011, Comments 0 comments

Ukraine will award its first shale gas contract to Anglo-Dutch giant Shell, a top official said on Wednesday amid rising global interest in one of Europe's largest holders of the new energy resource.

The $800 million (555 million euro) deal will be signed Thursday with the Naftogaz state energy holding company, making the Western major the first through the door to Ukraine's untapped shale gas market, the official said.

"We expect around $200 million to be invested in exploration and $600 million in production," Ukrainian presidential administration chief Sergiy Lyovochkin told reporters.

Ukraine lacks the advanced technology necessary to produce shale gas, whose production has taken off in recent years in the United States and is slowly being developed in Europe.

Other Western majors including the US firms Chevron and ExxonMobil have also expressed interest in Ukraine's shale gas, which is extracted from deep shale rock by an advanced process called fracking.

Some analysts suggest the former Soviet republic may hold up to 1.5 trillion cubic metres of the gas, although no official estimates have been conducted.

Ukraine has few other natural resources and relies for most of its natural gas imports on Russia, which briefly cut off its supplies in January 2009 during a dispute over prices.

The country is now trying to reduce its energy dependence on Russia and Prime Minister Mykola Azarov said Wednesday that Ukraine should also start using more coal in its power plants.

© 2011 AFP

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