Ukraine crisis heightens shale gas race
18.08.2014 – 18:40
Battle for control of Ukraine’s southeast is important for Kiev first of all because of the shale gas deposits, the head of the State Duma’s international affairs committee Aleksey Pushkov, has said.
“Kiev is fighting in Ukraine’s east for the gas reserves: Germany says the reserves make 5,578 billion cubic metres [the US reserves are 8,976 billion cubic metres]. Control will be from the US,” he wrote on Twitter on August 16.
For their part, Ukrainian officials have earlier said that Russia wants to prevent Ukraine, one of the biggest importers of Gazprom’s gas in Europe, from developing its shale reserves and therefore reducing its reliance on Russian gas.
Ukraine’s Yuzivska shale gas field is at the border between the Kharkov and Donetsk regions. The resources are estimated at over four trillion cubic metres.
In January 2013, Royal Dutch Shell signed a 50-year production sharing contract to explore shale natural gas reserves in Ukraine. But on July 31, Shell CEO Ben van Beurden said operations in shale acreage in eastern Ukraine can no longer continue as planned due to the ongoing crises in Ukraine. The CEO said the company’s shale acreage in the east of the country was close to the wreckage of Malaysia Airlines MH17, which was shot down in mid-July.
“The operation we had on unconventional exploration [in the area] is on hold,” he said. “We have declared force majeure as we cannot continue operations there.”
Meanwhile, the latest wave of EU sanctions against Russia for its role in Ukraine could also affect shale oil projects in Russia.
Konstantin Simonov, head of Russia’s National Energy Security Fund (NESF) in Moscow, told New Europe that Russia wants to launch a lot of projects from Russia’s Bazhen region and has signed several agreements with Germany’s Wintershall and France’s Total.
“Total is very active in all these projects and these projects are very interesting for foreign companies and these sanctions can destroy them but, of course, if there would be no new sanctions that will not be the end of our cooperation,” Simonov said.
Russia’s LIKoil and Total have signed a memorandum on cooperation in developing the Bazhen subsurface deposits in West Siberia. LUKoil plans to extract 100,000 tonnes of oil at the Bazhen fields in 2014. The Bazhen reserves belong to hard-to-recover ones, and the oil companies were about to start active operations to develop them.
Total already has a 16% stake in Novatek, the country’s second largest gas producer after Gazprom.
Meanwhile, the shale boom in the US is making it harder for Russia to expand its energy production ahead of an expected fall in international gas prices.
Russia, EU: Energy Frenemies