According to BP, the global hydrocarbon exploration and production major, Ukraine has proven natural gas deposits of 0.98 trillion cubic meters – enough to make the country self-sufficient in gas for the next 20 years. Government estimates include a further 2 to 32 trillion cubic meters of shale gas close to the Polish border and up to 8 trillion cubic meters of coal bed methane gas in the Donbas basin, although these have yet to be commercially proven. Methane is so abundant that 75 percent of Ukraine’s 200 coal mines are now classified as highly dangerous. In addition, there are new gas fields in Crimea and the potential for sizeable reserves of hydrocarbons on the Black Sea shelf.
As the figures show, Ukraine could achieve prosperity for its citizens and become a net exporter of energy to Europe. But it must first qualify these reserves that are in close proximity to the West and for which there already exists a ready-built pipeline network with spare capacity. But this is not happening and may explain why Ukraine’s state gas company Naftogaz and strategic natural gas pipeline is being pursued so ardently by Russian energy giant Gazprom.
Europe could have in Ukraine a potential Gulf state on its doorstep. It’s time for European policy makers to reassess Ukraine’s strategic value and to help safeguard democratic freedoms. Democracy is not just good for the people it is beneficial for business too.
The global cost of gas is declining due to cheap liquefied natural gas imports and new technologies that enable shale gas to be exploited commercially. In comparison, Russian natural gas extraction and transportation costs are relatively high given the remoteness of its reserves and unfavorable terrain. Ukraine’s gas reserves are close to lucrative European markets.
In order to exploit its hydrocarbon assets, Ukraine must end the vicious circle of corruption, bureaucracy and geo-politics that has hampered the industry and deterred foreign investors.
A reliable, independent judiciary, combined with greater transparency, accountability and the rule of law, would foster a safe and predictable environment for foreign energy investors and dramatically improve our investment attractiveness. These attributes, together with transparent and workable, production sharing agreements are desperately needed.
The government should renew the inclusion of ‘Stability Clauses’ into contracts to safeguard foreign investments. These give investors the right to compensation in case of radically changed political and economic circumstances. Their exclusion is cited as a major barrier to investment by leading energy companies.
Europe could have in Ukraine a potential Gulf state on its doorstep. It’s time for European policy makers to reassess Ukraine’s strategic value and to help safeguard democratic freedoms. Democracy is not just good for the people it is beneficial for business too.
Russia clearly has a strategy for Ukraine and its influence is growing. Perhaps Europe’s energy prosperity is more closely linked to Ukraine’s democratic development than many policy makers currently think.
Viktor Tkachuk is the Chief Executive Officer of the People First Foundation. He was a former Deputy Secretary of the National Security and Defense Council of Ukraine and an advisor to three Ukrainian Presidents and numerous Prime Ministers. Click here to read Viktor Tkachuk’s blogs on the Kyiv Post website.
