* Production-sharing deal would be for field in east Ukraine
* Deal for a field in west Ukraine faces political
* Shale exploration could ease dependence on Russian gas
By Richard Balmforth
KIEV, Jan 18 Ukraine is expected to sign a
landmark shale gas deal with energy major Royal Dutch Shell
next week while a second deal in the west of the
country faces local opposition, Prime Minister Mykola Azarov
said on Friday.
The former Soviet republic, which hopes its big shale gas
reserves will help end reliance on costly imports of Russian
natural gas, chose Shell last May as a partner to develop the
Yuzivska field in the east of Ukraine.
Ukraine is said to have Europe's third-largest shale gas
reserves at 42 trillion cubic feet (1.2 trillion cubic metres),
according to the U.S. Energy Information Administration.
Earlier this week, local authorities in the two regions
concerned - Donetsk and Kharkiv - approved the Yuzivska deal
with Shell, removing the final hurdle to an agreement.
Meeting a group of journalists from foreign news outlets on
Friday, Azarov said: "The Kharkiv regional council and the
Donetsk council yesterday and the day before took these
decisions. On Jan. 24, the production-sharing agreement will
definitively be signed."
Neither Azarov nor other government officials would say
where the deal would be signed. But officials informally
suggested it might take place in Davos on the fringes of the
international economic forum.
Shell in London would not comment on the date given by
Ukraine says if exploration is successful at the Yuzivska
site, production could begin within five to six years with
production running at 8-10 billion cubic metres (bcm) per year
in 10 years time.
"If everything goes as we plan ... in the foreseeable
future, in about three years, we'll have a good supply of gas,"
"At its peak, in 13-15 years, annual production may exceed
20 bcm. This will not only strengthen our energy independence
but will also significantly reduce gas prices," Environment and
Natural Resources Minister Oleh Proskuryakov said this week.
In May 2012, the Kiev government also chose Chevron
to develop shale gas at Olesska in the western Lviv and
Ivano-Frankivsk regions bordering the European Union.
But Azarov said this second possible shale gas deal had run
into local opposition, particularly from nationalist groups,
throwing into question whether a production-sharing agreement
would win regional support.
"In the west of the country, things are going slowly because
of political considerations. The majority on the Lviv regional
council is made up of well-known political forces," he said.
The far-right nationalist Svoboda party, which surged on to
the political landscape in parliamentary elections in October,
is strong in the west of the country and leads opposition to
shale gas exploration because of ecology considerations.
Shale gas technology uses a process called "fracking" in
which fluid and chemicals are injected at high pressure into
beds of rock, often situated deep in the ground, to access gas
reserves trapped there.
A Svoboda deputy, Iryna Sekh, who heads a parliamentary
committee on ecology this week said local authorities in the
east had voted blindly in support of the Yuzivska agreement
without being aware of its details and the possible ecological
The extraction process, she said on Svoboda party's website,
risked pollution of water reserves deep underground and
endangered natural animal and plant life.
Azarov is one of the principal actors in protracted talks
with Moscow aimed at getting it to reduce the price of the gas
it sells to Ukraine under a 10-year deal signed in 2009 by the
His government says the price of $430 per thousand cubic
metres is exorbitant, but it has so far failed to persuade
Russia to lower it.
It sees projects such as shale gas exploration and liquefied
gas imports from sources other than Russia as ways of reducing
its dependence on Moscow.
On Friday, Azarov said Ukraine also wanted to renew imports
of cheaper gas from Turkmenistan which needs to be shipped via
Officials have also issued figures to support the impression
that Ukraine is gradually weaning itself off Russian gas
"We cut our consumption of Russian gas by about 10 billion
(cubic metres) in 2012," Azarov said on Friday.