Ukraine awards first shale gas contract to Shell: firm

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Ukraine awarded its first shale gas exploration contract to the Anglo-Dutch giant Shell on Thursday in a deal worth up to $800 million (555 million euros), Ukraine's state gas exploration company said.

"In case of successful exploration work and the start of intense project development, Shell's total investment under the agreement may come to $800 million," Ukrgazvydobuvannya said in a statement issued after the signing.

Ukraine is widely believed to be one of Europe's largest holders of the new energy resource with estimated reserves up to 1.5 trillion cubic metres, according to industry analysts.

No official estimate has been made and there is no confirmed figure of how much shale gas might be hidden in the six blocks awarded to Shell near northeastern city of Kharkiv.

Ukraine lacks the advanced technology necessary to produce the hard-to-recover resource and is also holding negotiations with such Western majors as the US firms Chevron and ExxonMobil.

The former Soviet republic has few other natural resources and relies for most of its gas imports on Russia.

But it has been trying to lower its energy dependence on its neighbour since a price dispute temporarily cut Russian gas flows in January 2009 and is now focusing on other sources of energy that include coal.

"The agreement with Shell will be one of the first examples of Ukraine's successful cooperation in hydrocarbons development with an international energy company," Ukrgazvydobuvannya chief Yuriy Borysov said.

Ukrgazvydobuvannya said that Shell would be operating in Ukraine through a joint venture but offered no other immediate details.

© 2011 AFP

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