Shell lining up huge Ukrainian shale deal

Royal Dutch Shell is looking to sign a huge deal with Ukraine’s Naftogaz worth US$ 800 million to exploit Ukraine’s shale resources.

"The heads of Shell, who will sign a deal with Naftogaz, are going to meet President Viktor Yanukovich. The deal foresees that $200 million will be directed in probing and $600 million in investments," Serhiy Lyovochkin, President Viktor Yanukovich's chief of staff, told reporters.

Currently Ukraine imports more than 60% of its gas needs from its neighbour Russia, but has had supply disputes as it believes that the supply is too expensive to make Ukrainian goods competitive in world markets. Currently the country is paying US$ 350 per 1000 m³ of Russian gas, it is thought that the price will leap to US$ 400 per 1000 m³ in Q4 2011.

Indeed in January 2009, the dispute led to Russia cutting off supplies to Ukraine, Ukraine was forced to agree terms, which were felt to be damaging to national interests.

As a result of this pricing regime, Ukraine is looking to cut its dependence on imported Russian Gas and thinks that shale gas could be the way out.

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