Ukraine is making a lot of progress in its attempt to diversify gas supplies to avoid paying extortionate prices to Russia's Gazprom, Prime Minister Mykola Azarov said on Jan. 18.
He said the nation plans to extract up to 2 billion cubic meters of gas on the Black Sea shelf, and can potentially buy up to 5 billion cubic meters of gas from Germany if the price is right.
“We will extract more gas than Romania and Turkey do on the [Black Sea] shelf,” Azarov said. He said this will become possible because of the purchase of two rigs, which have caused much controversy in the media because of suspicion of corruption on behalf of Yuriy Boyko, a deputy prime minister and former energy minister who concluded the deal through a series of offshore companies.
Azarov also said that his government is planning to sign a product sharing agreement with international giant Shell on Jan. 24, a key document before the company can start geological surveys of Yuzovka field in eastern Ukraine. Earlier this week, Donetsk and Kharkiv regional councils preliminary approved the deal.
According to estimates, Ukraine has 1.2 trillion cubic meters of shale gas reserves in eastern and western Ukraine. In May, Shell won a tender to develop the deposit in the east, while Chevron won the right for the other large deposit in Lviv and Ivano-Frankivsk region. Chevron, however, is facing resistance to shale gas extraction in western Ukraine because of environmental concerns and for political reasons.
Ukraine also hopes to receive access to Turkmen gas through a Russian pipeline through an agreement on free access to pipelines that comes into effect this year, according to Azarov.
Ukraine is highly dependent on Russian gas imports. Although gas consumption fell by nearly 10 percent in January-October 2012 compared to the same period a uear befpre, it still stood at 41 billion cubic meters, according to the Ministry of Energy and Coal Industry.
Most of this gas (27.7 billion cubic meters) Ukraine imports from Russia at an exorbitant price, having paid a total of $11.8 billion in January-October, a huge strain on a national budget that is only $51 billion annually.
Ukraine pays $430 per 1,000 cubic meters of imported Russian gas under a 2009 deal signed by former Prime Minister Yulia Tymoshenko, who was sentenced to seven years in jail for signing that agreement.
