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Royal Dutch Shell Delivers Latest Blow To European Shale

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Royal Dutch Shell may be looking to exit Ukrainian shale as conditions in the region have prompted a delay

Royal Dutch Shell Plc (ADR) (NYSE:RDS.A) has delivered the latest blow to European shale, as it considers withdrawal from its last Ukrainian exploration well.

With Nadra Yuzivska as its partner, the European oil major signed a production sharing agreement (PSA) to explore the Yuzivska shale gas field, which was discovered in 2010.

However, the recent conflict between Russia and Ukraine has prompted Shell to put the project on hold for almost a year, as it has not been able to fulfill its commitments for the Yuzivska project.

Since signing the deal in 2013, conditions surrounding the projects have changed materially, Shell said, as it heads towards the exit.

“We have begun discussions with the Ukrainian government and our partner Nadra Yuzivska LLC on the way forward with the PSA,” Shell confirmed in a statement, as reported by Reuters.

Last year, Chevron exited Ukrainian shale after pulling the plug on its $10 billion shale gas project.

Shale gas production, which has bloomed in the US, has not enjoyed similar success in Europe. In addition to execution challenges, companies looking to explore for shale oil and gas in Europe have run into regulatory hurdles and negative public opinion.

Shale production employs a controversial technique called hydraulic fracturing. Environmentalists argue the technique, also known as fracking, has environmental and health risks. Negative opinion is prevalent throughout most of Europe. France has banned fracking as a whole, while the German government has not allowed companies to conduct suitability tests.

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