: :inin Kyiv (EET)

Ukraine`s Cabinet says no to Yuzgas shale gas production

Ukraine`s Cabinet of Ministers has not supported an investment program for the development of the Yuzivska shale gas field in the country`s eastern Donetsk and Kharkiv regions, and rejected Yuzgas B.V.`s participation in a production sharing agreement (PSA) under the program.

A respective protocol decision was read out by Ukrainian Prime Minister Volodymyr Groysman, and it was supported by members of the Cabinet.

”[Let us] support a proposal put forth by the Energy and Coal Industry Minister that Nadra Yuzivska LLC be not allowed to concede its rights and liabilities under a PSA on the Yuzivska deposit,” Groysman announced on Wednesday, November 2.

He also instructed the Energy and Coal Industry Ministry jointly with the Cabinet`s secretariat to provide Nadra Yuzivska LLC and Yuzgas (also spelled as Yuzgaz) B.V. with a letter explaining the grounds of the decision.

As UNIAN reported earlier, Dutch Yuzgas B.V. late in July 2016 won a tender to produce shale gas in the Yuzivska field in eastern Ukraine, replacing Royal Dutch Shell, originally chosen during Viktor Yanukovych`s presidency to operate and develop hydrocarbon deposits in the east of Ukraine.

Early in August 2016, representatives of Yuzgas B.V. said they were ready to invest $200 million in the development of the Yuzivska field in the next five years.

Yuzgas B.V. Director Jaroslav Kinach said his company planned to hire Schlumberger for geological prospecting at the site.

Kinach, a founding partner of Emerstone Capital Partners, headed the Kyiv office of the European Bank for Reconstruction and Development in the late 1990s, following which he founded a Canadian firm, Iskander Energy, which executed methane gas production projects in Ukraine and also owned hydrocarbon deposits in Georgia and Bulgaria. In recent years, he was head of Canadian-based Black Iron.

If Yuzgas had been approved by the Cabinet as a participant in the PSA, its share in the project could have been 90% with the remaining 10% held by Nadra Yuzivska.

Nadra Yuzivska was created to undertake a project for the prospecting and production of hydrocarbons under the PSA on the Yuzivska field. On January 24, 2013, the Ukrainian government, Royal Dutch Shell and Nadra Yuzivska, signed a PSA on the Yuzivska field in Kharkiv and Donetsk regions.

As of July 27 this year, 10% of the company belonged to SPK-Geoservice LLC (Kyiv), which was reportedly affiliated with the allies of former Ukrainian President Viktor Yanukovych, and the remaining 90% was held by Nadra Ukrainy. SPK-Geoservice changed its owners in 2015.

Royal Dutch Shell began the development of shale gas deposits in Kharkiv and Donetsk regions after the signing of the PSA, but in June 2015 decided to withdraw from the project, which was in October 2015 confirmed by then Energy and Coal Industry Minister Volodymyr Demchyshyn.

UNIAN memo. National joint-stock company (NJSC) Nadra Ukrainy is a leading geological prospecting operator in Ukraine. It holds 20 special licenses to use oil and gas deposits. Its resource base is estimated at 47 million tonnes of fuel equivalent, it has 120 wells, 16 sites for drilling and 40 sites for seismic tests. In addition, it has developed 23 business projects for potential oil and gas bearing areas.

The company operates 13 geological prospecting and specialized enterprises.

Nadra Ukrainy is wholly-owned by the state and operated by the State Geology and Mineral Resources Service of Ukraine.


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