* Deal for Olesska field in western Ukraine
* Ukraine seeks energy independence from Russia
* Signing will boost Ukraine president
By Pavel Polityuk and Richard Balmforth
KIEV, Nov 5 Ukraine signed a $10 billion shale
gas production-sharing agreement with U.S. Chevron on
Tuesday, another step in a drive for more energy independence
The deal to develop its western Olesska field followed a
similar shale gas agreement with Royal Dutch Shell in
January and boosts Ukraine's leadership at a time of fraught
relations with Moscow over gas supplies.
"The agreements with Shell and Chevron ... will enable us to
have full sufficiency in gas by 2020 and, under an optimistic
scenario, even enable us to export energy," President Viktor
Yanukovich told investors shortly before the signing.
The highest end of expectations for Olesska's potential
reserves would match around three years of European Union gas
demand, but similarly sunny hopes for shale reserves in
neighbouring Poland have been very sharply downsized.
Shale development in Europe is far behind the booming U.S.
sector and progress is patchy. Chevron pulled out of a shale
exploration tender in Lithuania and has suspended work at a
Romanian shale well after local protests.
Ukraine Energy Minister Eduart Stavytsky, who signed the
deal with Chevron executive Derek Magness, set it in the context
of a high price Ukraine pays Russia for its gas.
"This is one more step towards achieving full energy
independence for the state. This will bring cheaper gas prices
and the sort of just prices which exist (elsewhere) in the
world," he said.
Ukraine pays $400 per thousand cubic metres for Russian gas
under a 2009 10-year agreement. Kiev has failed to re-negotiate
its terms with Moscow.
The agreement with Chevron, to extend for 50 years, foresaw
an initial investment of $350 million by the U.S. major in
exploratory work over two or three years, Stavytsky said, aimed
at establishing the commercial viability of shale reserves in
the 5,260 square km (2,000 square miles) Olesska, part of a band
of shale which stretches from the Baltic to the Black Sea.
Earlier government figures set total investments, including
extraction after exploratory drilling, at around $10 billion.
FRICTION WITH RUSSIA
Stavytsky said the Ukrainian side hoped that exploratory
work would yield more detailed information about reserves at
Olesska in 2015.
It was expected that Olesska would produce 5 billion cubic
metres per year - and possibly as much as 8-10 billion cubic
metres, he said.
The deal with Shell, which is at a similar level of
investment, is for exploration at Yuzivska in eastern Ukraine.
The two shale projects could provide Ukraine with an
additional 11 to 16 billion cubic metres (bcm) of gas in five
years' time, according to projections by the Kiev government.
With Ukraine also a transit route for Russian gas to Europe,
rows in the past which have led to disruption for European
The two sides clashed over prices in the winters of 2006 and
2009, with Moscow halting deliveries not only to Ukraine but to
the rest of Europe.
With Russia angered over Ukraine's plans to sign a landmark
agreement with the European Union which will mark a shift away
from Russia's sphere of influence, the issue has flared again.
Late last month, Russia's gas export monopoly Gazprom
demanded Ukraine pay a $882 million overdue gas bill
Stavytsky said on Tuesday that Ukraine had already begun to
settle the outstanding bill but gave no details.
Gazprom spokesman Sergei Kupriyanov said his company had
recently received $9 million in payments from Naftogaz Ukraine.
"It's just a drop in the ocean," he said.
Russian Prime Minister Dmitry Medvedev has since said he
sees no reason for Moscow to cut gas supplies to Ukraine over
the unpaid bill for now and has played down talk of an imminent
"gas war" that might disrupt flows to Europe.