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Shell To Work With Ukraine Naftogaz On Gas Exploration

THE WALL STREET JOURNAL: Shell To Work With Ukraine Naftogaz On Gas Exploration

11 May 2005

DOW JONES NEWSWIRES

LONDON — Royal Dutch/Shell (RD, SC) Tuesday struck a cooperation agreement to explore potential gas resources with Ukrainian national gas company Naftogaz Ukrainy (NGAZ.YY) in the Dniepr-Donets basin.

A person close to Shell said the deal, the first of its kind in Ukraine for an international oil major, could help the Anglo-Dutch company gets a foothold into the country’s hydrocarbons reserves.

The companies have agreed to cooperate in technical studies covering an agreed area of joint interest of over 30,000 square kilometers, with the potential for further enlargement, Shell said in a statement.

The company added the studies will lead to joint exploration for and production of hydrocarbons.

“We believe the combination of the detailed technical and operational knowledge of Naftogaz Ukrainy and access to state-of-the-art technology from Shell will result in mutual benefits and we look forward to a fruitful partnership”, said Naftogaz Ukrainy’s Chairman, Olexiy Ivchenko.

Shell already has downstream activities in Ukraine, but getting access to upstream opportunities is essential as the company needs to rebuild its reserves after downgrading them five times since last January.

According to the U.S. Department of Energy, Ukraine has roughly 40 trillion cubic feet of natural gas reserves, from which roughly 0.69 tcf was produced in 2003.

The pact comes as neighboring Russia has expressed reluctance to make new energy resources available to foreign companies.

The Ukrainian deal is the latest exploration deal with newly opening countries. Last week, it was awarded five gas blocks in Libya, along with the upgrade of a liquefied natural gas plant.

Company Web site: http://www.shell.com

-By Benoit Faucon, Dow Jones Newswires; +44 (0)20 7842 9266; [email protected]

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