* Chevron deal would be second shale agreement in Ukraine
* Nationalists say deal would damage environment
* Ukraine sees shale as alternative to costly Russian gas
KIEV, Aug 20 A shale gas deal in Ukraine hit a
setback on Tuesday when a local council rejected the
government's draft production-sharing agreement with U.S. energy
company Chevron amid warnings by nationalists regarding
likely damage to the environment.
Officials told Reuters that deputies in Ivano-Frankivsk
region, in western Ukraine, had sent the draft back to the
government, pressing for guarantees which would address their
concerns over the exploration plans.
Chevron wants to tie up a deal to explore the Olesska shale
field in western Ukraine. Royal Dutch Shell has already
signed a $10 billion deal for shale exploration and extraction
at the Yuzivska field in the east of the ex-Soviet republic.
According to the council's website, deputies expressed
concerns over the ecological consequences of shale exploration
in the mountainous forest region which is known for inland
The "fracking" process, in which water and chemicals are
used to break up rock, sandstone and shale deposits to release
gas, has sparked opposition from environmentalists elsewhere in
Europe who fear it can pollute underground water.
But the Kiev government sees shale gas development as
important for easing its dependence on costly gas imports from
Russia which weigh heavily on its economy.
Fuel Minister Eduard Stavytsky was quoted by UNIAN news
agency as saying that Chevron has proposed investing $350
million in initial tests to ascertain the commercial viability
of gas deposits at the Olesska field, with a $3 billion
investment envisaged for the first stage of extraction.
Stavytsky told Reuters by telephone: "We will consider the
proposals (from the council) and in mid-September there will be
"There is nothing dramatic in what has happened. This is the
normal working process," he said.
"Chevron looks forward to understanding how the Ukrainian
government plans to address the concerns raised by the
Ivano-Frankivsk Regional Council which will enable us to move
forward expeditiously to implement this strategic project," a
Chevron spokeswoman said.
In the council debate, Iryna Sekh, a national deputy from
the Svoboda far-right nationalist opposition, said: "This
agreement opens the way to lawful destruction of Ukrainian land
during gas extraction.
"There are clauses in the agreement which allow Chevron to
turn hundreds of kilometres of Ukraine into swamp and desert.
Chevron would have the right to use sand, stone, underground
water supplies and other water sources on the basis of
agreements in and beyond the (agreed) area.
"I doubt that there is a country in the world which would
allow such rights and privileges to a foreign investor," she
Even if the Ivan-Frankivsk council eventually supports the
deal, it would still require the approval of a second council in
the Lviv region.