Ukraine to sign $10 billion shale deal with Chevron

KIEV Wed Oct 30, 2013 9:36am EDT

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KIEV (Reuters) - Ukraine said on Wednesday it will sign a $10 billion shale gas production-sharing agreement with U.S. energy major Chevron (CVX.N) next week - its second such deal this year.

Ecology Minister Oleh Proskuryakov said the deal for exploration and extraction at the Olesska site in western Ukraine, which follows one signed with Royal Dutch Shell (RDSa.L) earlier this year, would be signed next Tuesday at a regional economic forum in the capital Kiev.

Deputies in western Ukraine cleared the way for a deal when a majority voted in favour of the government's plans for exploration at Olesska, overcoming opposition from local lobby groups concerned at possible ecological damage from the project.

"The government has approved the draft agreement which will be signed within the framework of the investment forum on November 5 in Kiev," Proskuryakov was quoted as saying by the Interfax news agency.

The production-sharing agreement foresees an initial investment of $350 million by Chevron in exploratory work aimed at establishing how commercially viable shale reserves are at Olesska, which covers 5,260 square kilometers.

Total investments, including extraction after exploratory drilling, are put at around $10 billion.

The Shell deal, for a similar level of investment, is for exploration in Yuzivska in eastern Ukraine.

The two shale gas projects could provide Ukraine with an additional 11 to 16 billion cubic meters (bcm) of gas in five years' time, according to government projections.

Shale exploration forms part of plans by Ukraine to diversify its energy sources to ease dependence on costly natural gas imports from Russia.

(Writing By Richard Balmforth; editing by David Evans)

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