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kommersant.com (Russia): Ukraine Teams Up with Shell against Russia

June 09, 2006

Shell Exploration has entered into an agreement with NAK Naftogaz Ukrainy subsidiary, Ukrgazdobycha, to produce oil and gas at the fields of Dnepr and Donetsk basin. In Ukrainian government, they hope this cooperation will reduce dependency on Russia. But Shell could have just set stakes in Ukraine and will hardly proceed to exact production in the nearest future.

Ukrgazdobycha General Director Ilya Rybchich and Shell Exploration Vice President Rien Herber sealed an oil/gas cooperation agreement in The Hague Thursday, June 8, 2006. “First time over 15 years of our independence, a leading world company, Shell, sets foot on the soil of Ukraine,” Ukrainian President Viktor Yushchenko, who attended the signing, said emphasizing the negotiations lasted for eight years.

The yesterday’s agreement authorizes Shell to immediately start exploration of the fields of Dnepr and Donetsk basin, gives access to the gas transport system of the country and guarantees gas transit via it. But it doesn’t stipulate production volume, provisions of production or the project duration. Nevertheless, spokesmen of Yushchenko’s office are sure Shell will funnel at least $100 million in the exploration.

The agreement with Shell will enable Ukraine to reduce dependency on the gas and oil of Russia and to break Gazprom’s monopoly on gas transit via its pipelines, spokesmen of press service of Ukrainian government said.

The analysts are not so optimistic, as the field offered to Shell may annually yield no more than 1 million tons of oil or 5 billion cu meters of gas, all of the amount to be sold in Ukraine. Besides, Shell is known for setting stakes worldwide, but it may get down to the actual production in Ukraine only in the distant future.

www.kommersant.com

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