* Ukraine says Shell estimates investment at $10 bln-$50 bln
* Project is key to easing dependence on Russian gas imports
DONETSK, Ukraine Jan 16 Ukraine took a step
closer to a breakthrough shale gas deal with global energy major
Royal Dutch Shell on Wednesday when local authorities
in the eastern Donetsk region approved a planned production
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 shale gas field.
Deputies of the Donetsk regional council voted to approve
the deal with Shell, removing one of the final hurdles to an
Ukraine is said to have Europe's third-largest shale gas
reserves at 42 trillion cubic feet (1.2 trillion cubic metres)
behind those of France and Norway, according to the U.S. Energy
"If exploration is successful in the Yuzivska area, we will
be able to produce a few billion cubic metres (bcm) of gas per
year in just five-six years and eight to 10 bcm in 10 years,"
Environment and Natural Resources Minister Oleh Proskuryakov
told the council.
"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."
Ukraine currently pays about $430 per thousand cubic metres
for Russian gas under a 10-year deal signed in 2009 by a
preceding government. The present Kiev government says the price
is exorbitant, but it has so far failed to persuade Russia to
bring it down.
"Secondly, the Yuzivska area production sharing agreement is
the biggest project in Ukraine that will attract tens of
billions of dollars in investment," Proskuryakov said.
"Shell sees investment at $10 billion under the most likely
scenario and over $50 billion under the optimistic scenario."
Shell's office in Ukraine declined to comment on the figures
or to say any expected date for signing a deal. Under the terms
of the tender, the two sides have until May to sign a contract.
Proskuryakov, whose office also had no immediate comment on
an expected date of signing, had earlier said his ministry
expected to finalise and sign the deal in the first quarter of
Shale gas exploration requires a process called "fracking"
in which fluid is injected at high pressure into beds of rock,
often deeply situated in the ground, to access gas reserves
In a separate tender also carried out last May, Ukraine
picked Chevron to develop another shale gas area,
Olesska in western part of the country. The government has not
yet signed a production sharing agreement with Chevron either.
Some countries which were initially encouraged by the
success of the shale gas industry in the United States have
faced disappointment after starting their own exploration.
Ukraine's neighbour Poland, whose reserves were estimated by
a 2011 U.S. study at 5.3 trillion cubic metres, slashed the
estimate to about a tenth of that in a government report last
U.S. oil major Exxon Mobil agreed to sell two shale
gas exploration concessions in Poland to the local refiner PKN
Orlen for an undisclosed price last month after its
test wells failed to produce commercial quantities of gas.