The shale gas deposits that Ukraine hopes to find and develop won't reduce its reliance on gas from Russia, the head of Gazprom Export LLC's contract structuring and pricing department, Sergei Komlev, said at a roundtable on current problems in the European energy sector.
"There is no point in hoping that shale gas will be the magic wand that ends Ukraine’s dependence on gas from Russia," he said.
Although Ukraine’s estimated shale gas resource totaling 2 trillion cubic meters represents technically recoverable reserves, not proven reserves, the figure has had "a dazzling effect" on the public, he said
Shale gas currently costs more than $200 per 1,000 cubic meters or $6 per million British thermal unit (BTU) to produce, although gas is priced at no more than $4 per million BTU ($160 per 1,000 cubic meters) at Henry Hub.
Shale gas producers are surviving thanks to hedging against a drop in price below $6-$7 per million BTU, he said.
"However, analysis of the financial statements at the producers, and the situation on the futures market, shows that fewer and fewer companies are able to use that instrument," he said.
