Royal Dutch Shell and Ukrainian state-run gas and oil company Naftogaz will sign a deal on shale gas exploration in Ukraine to reduce the former Soviet republic’s dependence on Russian gas, a top presidential official said on Wednesday.
Serhiy Lyovochkin, President Viktor Yanukovich’s chief of staff, said the deal should be signed on Thursday and that Shell promised to invest about $800 million in the project.
“The heads of Shell, who will sign a deal with Naftogaz, are going to meet President Viktor Yanukovich. The deal foresees that $200 million will be directed in probing and $600 million in investments,” Lyovochkin told reporters.
According to Ukrainian energy officials, the nation has significant deposits of shale gas in its eastern Donbass region.
Russia’s TNK-BP last year said it also expected to sign a memorandum on shale gas exploration in Ukraine.
Ukraine, which imports about 60 percent of gas for domestic consumption from Russia, has said its neighbour’s prices are too high for Ukrainian goods to be competitive on world markets.
It paid about $350 per 1,000 cubic metres of Russian gas for the third quarter and expects that the price will jump to about $400 in the fourth quarter.
Ukraine’s Prime Minister Mykola Azarov was quoted as saying on Tuesday that the country, a top buyer of Russian gas, should reduce imports by two-thirds in coming years.
Earlier this month Ukraine’s Energy Minister Yuri Boiko said Kiev planned to cut gas consumption to about 54 billion cubic metres (bcm) in 2011 from 64 bcm in 2010.
He also said Ukraine was seeking to cut imports of Russian gas to 12 bcm in five years from about 40 bcm in 2010.
In January 2009, a pricing row between Moscow and Kiev resulted in the stoppage of Russian gas flows to Europe for about two weeks, tarnishing Moscow’s image as a reliable exporter and spurring a European quest for new suppliers.
Yanukovich’s administration says the 2009 agreement was a sell-out of national interests, although it is abiding by the terms.
But Ukraine and Russia have failed to agree on new conditions for gas supply and Kiev has said the dispute could be moved to international courts.
The gas deal has already caused political turmoil in Ukraine. The prosecution alleges former Prime Minister Yulia Tymoshenko forced the then-head of Naftogaz to sign a deal with Russia’s Gazprom without consulting her government.
