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Financial Times: Shell signs Ukraine gas deal

By Roman Olearchyk in Kiev
Published: August 24 2006 03:00 | Last updated: August 24 2006 03:00

Royal Dutch Shell has inked a small but strategically important gas purchase agreement in Ukraine with Poltava Petroleum Company, a subsidiary of UK-based JKX Oil & Gas.

The agreement marks the continued expansion of Shell into Ukraine, which has been dominated by Russian and Ukrainian companies.

JKX said in a statement that the agreement would give the Shell subsidiary a minimum of 250m cubic metres of gas over a 12-month period commencing in September.

It also allows Shell to acquire more gas from Poltava Petroleum, which produced more than 356m cubic metres of gas in the previous year.

Shell said the agreement marked the energy giant’s entry into the gas trading market of Ukraine, a large consumer of gas and transit route for hydrocarbons from Russia and central Asia to Europe.

Shell said it would sell the gas to industrial and commercial consumers, adding that the company did not yet have export rights allowing for westward sales to Europe, where prices are higher.

Poltava Petroleum is the principal production unit for JKX, which is traded on the London Stock Exchange.

Poltava Petroleum is a lucrative operation that produces only a fraction of the gas needs of Ukraine, a country that consumes in the order of 75bn cu m annually.

Ukraine produces 20bn cu m of gas every year,importing the rest from gas-rich Russia and Turkmenistan.

It has opened its doors to western energy firms, seeking help in reducing its energy dependence on Russia.

Copyright The Financial Times Limited 2006

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