KYIV -  Royal Dutch Shell has reaffirmed its commitment to a 50/50 partnership with a subsidiary of state energy company Naftogaz, pledging to invest up to $200 million into a joint effort to explore for hydrocarbons in eastern Ukraine.

Inked on Sept. 1, the agreement follows up on a joint activity partnership that was first formed between Shell and state-owned gas producer Ukrgazvudobuvannya in 2006, when investment interest in Ukraine surged on the heels of the pro-democracy 2004 Orange Revolution.

The updated agreement was signed in the presence of Shell CEO Peter Voser and Ukrainian Energy Minister Yuriy Boyko.

Ukrainian officials boasted that as much as $800 million could be invested into Ukraine by Shell: $200 million in the initial exploratory phase followed up by $600 million for production.

Over the years, declarations about the vast potential of the project and joint cooperation abounded, but relatively little progress was made below or above ground.

The purpose of the updated joint activity agreement signed on Sept. 1, according to a Shell statement, “remains unchanged – exploration and production of hydrocarbons in the license areas.”

Shell said the revised and updated agreement “improved understanding” of the joint activity license areas, introduced a phased approach to the exploration program and refined governance and funding arrangements.

The administration of Viktor Yanukovych, president since 2010, says it is stepping up efforts to attract international energy majors into Ukraine’s domestic energy sector, which has long been dominated by domestic and Russian business interests.

The aim, they say, is to bring in the financial investment and know-how needed to boost domestic hydrocarbon production, in turn helping Ukraine to diversify away from increasingly expensive Russian fuel imports.

On Aug. 31, presidential chief of staff Serhiy Lyovochkin told journalists that Shell was on the verge of investing up to $800 million into exploration and production.

Shell, however, provided a far smaller number for the amount of investment it has thus far committed.

As far as the much-delayed exploration and production into the Dnipro-Donbas basin goes, Shell said that upon completion of preliminary exploration work under the 50/50 project, its expenditure will amount to $200 million. Drilling is expected to commence in 2012, Shell added.

Ukrainian officials point to Shell as one of a growing list of international energy giants, including Italy’s Eni, America’s ExxonMobil and Chevron and Russian-British TNK-BP, which are eager to unlock Ukraine’s potentially large hydrocarbon reserves bringing investment, traditional and new technologies such as shale gas extraction.

One of the few international energy majors that has maintained a large office in Ukraine since the 1990s, Shell on Sept. 1 stressed that it remains committed to helping Ukraine unlock fresh energy reserves.

“At Shell we have a proven track record of developing large and complex projects … and are keen to apply our global experience and innovative technology to unlock [Ukraine's natural] gas potential in the joint activity agreement areas safely and effectively,” said Patrick Van Daele, general manager of Shell Ukraine Exploration and Production.

LINK:  http://www.kyivpost.com/news/business/bus_general/detail/112067

NOTE:  Shell and The Kyiv Post are members of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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2.  SHELL TO EXTRACT SHALE GAS IN UKRAINE 

Worldwide News Ukraine, Kyiv, Ukraine Friday, Sep 2, 2911

KYIV, Ukraine, PRNewswire via COMTEX/ -- Today the Royal Dutch Shell plc. signed a new version of the cooperation agreement with Ukraine. The agreement covers Shell's involvement in shale gas extraction and diversification of energy resources mining in Ukraine. Later today the CEO of Shell Peter Voser met with the President of Ukraine Viktor Yanukovych to discuss the agreement and future cooperation.

The agreement that was signed today between the Ukrainian public company Ukrgazvydobuvannia and Shell plc. stipulates the future cooperation in the area of exploration and extraction of hydrocarbons in Dnipro-Donetsk basin, Central Ukraine.

According to the agreement Ukraine will be able to take advantage of modern technology and start developing unutilized gas resources, including the unconventional ones. The parties agreed that Shell is going to invest up to USD 800 million into the shale gas development project, according to RBC. The first stage of the project is estimated at USD 200 million with USD 600 million to follow.

After the meeting with the president of Ukraine, CEO of Shell Peter Voser stated that Shell was interested in the cooperation and confirmed the company's eagerness to provide expertise as well as the technology, to intensify and diversify mining of energy resources in Ukraine.
The initial agreement between Ukrgazvydobuvannia and Shell was signed in 2007 and stipulated the first stage of developing of the Dnipro-Donetsk trench. The potential of the area was estimated at 400 billion cubic meters of gas. Notably, around 80 percent of hydrocarbon extraction in Ukraine is conducted in Dnipro-Donetsk trench.

In 2010, the press center of the Ministry of Environment stated that the territory of Ukraine enjoys the biggest shale gas supply in the world. However, the volume of the substance was not specified. Since then a number of international companies has expressed their desire to explore and develop unconventional gas resources in Ukraine.

Thus, on 9 November 2010, Canadian East West Petroleum Cooperation (EWP) and Kuwait Energy Company verified their readiness to yield shale gas in Ukraine, as stated in Toronto stock exchange announcement. Prior to that, in June of the last year, a Polish company Kulczyk Oil completed the purchase of 70 percent of the Ukrainian gas-extracting company KUB-gas. This proves the ever-growing international interest towards Ukraine's natural resources.

LINK:  http://www.marketwatch.com/story/shell-to-extract-shale-gas-in-ukraine-2011-09-02