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Ukraine queries Royal Dutch Shell and Chevron shale deals

Extract from an article by of Reuters, published on 4 March 2014 by The Chicago Tribune

Screen Shot 2014-03-04 at 17.39.57Ukraine queries shale deals as Yanukovich era under scrutiny

KIEV/LONDON (Reuters) – Commercial deals concluded by Ukraine during the presidency of Viktor Yanukovich are already coming under scrutiny, less than two weeks since he was deposed, with lucrative gas projects involving Western companies among the first. Some Ukrainian parliamentarians have called for the new government to examine how, without significant financial outlay, a small Kiev-based consultancy received interests in shale gas projects led by Royal Dutch Shell and Chevron worth hundreds of millions of dollars. Andrew Neff, analyst at IHS Global Insight, said any investigation raises questions about whether Shell and Chevron’s contracts would be respected by the new government and that at the very least a probe would likely delay the projects.

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Even Ukraine’s ousted President Yanukovich, despite his dealmaking with Russia, had clearly acquiesced to pressure to explore Ukraine’s other energy options. Last year Ukraine signed natural gas exploration deals with Royal Dutch Shell as well as Chevron, which pledged to invest as much as $10 billion if adequate supplies of shale gas were found. The government said it hoped the two companies’ projects would add more than 50% to Ukraine’s current domestic natgas supply. Ukraine could hold more than 40 trillion cubic feet of recoverable shale gas, enough to satisfy decades of demand. Now with Yanukovich gone it’s as if Putin has taken the Crimea as a kind of hostage…

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The world is obviously waiting raptly for an indication of the next occurrence in the chaos gripping Ukraine. There also is a group of western companies preparing to begin exploratory drilling in Ukraine, an effort being undertaken with an eye toward reducing the country’s dependence on Russian gas. For instance, Shell’s docket for the year includes the drilling of 15 appraisal wells in eastern Ukraine’s Yuzivska field. That effort is slated to cost a not-inconsequential $10 billion.

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