Ukraine, Shell ink $ 10 bn shale gas deal

Updated 25 January 2013
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Ukraine, Shell ink $ 10 bn shale gas deal

DAVOS: Ukraine and the global oil giant Royal Dutch Shell signed yesterday a $ 10 billion shale gas production sharing agreement aimed at helping the ex-Soviet nation ease its dependence on Russia.
Ukrainian President Viktor Yanukovych and Shell CEO Peter Voser signed the deal on the sidelines of the World Economic Forum in Davos, a gathering of the world's business and political elite.
Earlier yesterday, Ukrainian Energy Minister Eduard Stavitsky put the value of the deal at $ 10 billion.
Yanukovych said the deal was "only the beginning" and vowed: "From now on we will also be able to find a flexible method of co-operation that will add value to both our countries' economies."
The prime minister of The Netherlands, where Shell is based, said he wished "every success" to the new venture and praised the firm.
"Despite the fact it is a company that has been established a long time ago, it is still at the forefront of entrepreneurship," Mark Rutte said.
The Ukrainian government estimates the eastern Donetsk location may hold three trillion cubic meters (100 trillion cubic feet) of natural gas — enough to last the nation of 46 million people 70 years at current consumption rates.
The Shell deal comes amid an upsurge of foreign interest in Ukrainian shale gas — tapped by a controversial process known as fracking — after the industry took off in North America.
Some forecasts suggest that Ukraine alongside countries such as France and Poland may hold some of Europe's largest shale rock deposits.
Voser said it was a "very important day for Shell" and acknowledged it was a "big step" for his firm.
Stavitsky said earlier Ukraine will be able to completely break its energy dependence on Russia should shale gas production proceed as envisioned under the deal.
"If we follow the optimistic scenario, our existing (energy) deficit problems will be solved," the energy minister said.
Ukraine lacks the technology to reach the deep-buried shale rock holding the gas and continues to rely heavily on gas imports from its eastern neighbor Russia.
It hopes to renegotiate the terms of a 10-year gas deal it signed in 2009 with Russia that sets high purchase prices.
But Moscow has set Ukraine's membership in a loose Moscow-led trade body as a precondition and also wants partial ownership of Ukraine's gas pipeline and distribution network.
No deal has been reached despite more than two years of talks.


OPEC nears oil output deal ahead of key Vienna meeting

Updated 12 min 4 sec ago
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OPEC nears oil output deal ahead of key Vienna meeting

VIENNA: OPEC energy ministers expressed optimism Thursday they were nearing a compromise on oil output policy, with Saudi Arabia acknowledging that a big production hike would be “politically unacceptable” to archfoe Iran.
OPEC and non-OPEC partner countries are due to hold crunch talks in Vienna on Friday and Saturday to decide the fate of an 18-month-old supply-cut pact that has cleared a global oil glut and lifted crude prices to multi-year highs.
Saudi Arabia, backed by non-member Russia, is now racing to convince the alliance to raise production again in order to meet growing demand in the second half of 2018.
Adding an extra one million barrels per day to the market “sounds like a good target to work with,” Saudi Energy Minister Khalid Al-Falih said at a seminar organized by the Organization of Petroleum Exporting Countries (OPEC).
Regional rival Iran however is fiercely opposed to unwinding the agreed production curbs, as its oil industry is bracing for fresh sanctions following US President Donald Trump’s decision to quit the international nuclear pact.
Several other OPEC members, including Venezuela and Iraq, are also against major changes to the pact as they are unable to immediately boost production.
Signaling that positions might be softening, Saudi’s Falih acknowledged that “not every country can respond to an allocation of higher production” and said it was important to be “sensitive” to those concerns.
Allowing countries like dominant player Saudi Arabia to make up for the shortfalls of other members “may be a technical solution but it may not be politically acceptable to others,” he said at the Vienna seminar.
As the clock ticks down to the upcoming ministerial meetings, a face-saving compromise appeared to be in the works.
“We hope that there will be an agreement,” Iraqi Oil Minister Jabbar Al-Luaibi told reporters.
“Iraq is trying very hard to narrow the gap between the two blocs.”
UAE Energy Minister Suhail Mohammed Al-Mazrouei added: “I am very optimistic.”
Observers say the participating countries could simply agree to stop exceeding their quotas for cutbacks, and stick to the agreed target of trimming production by 1.8 million barrels per day (bpd).
The 24 nations in the pact, known as OPEC+, are currently keeping more than two million bpd off the market.
Most of the shortfall has come from Venezuela, where an economic crisis has savaged the nation’s petroleum production.
Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.