UEF 2014: Unconventional Gas Production Perspectives In Ukraine

Will Ukraine become one of the European pioneers and leaders in unconventional gas production? This was the main question during one of the sessions of 5th Adam Smith Ukrainian Energy Forum, where the perspectives of unconventional gas projects in Ukraine were discussed.

Paweł Poprawa, adviser at Energy Studies Institute in Poland, while opening the session admitted, that Ukraine has significant potential for unconventional gas production and could realize it in the near future.

Ukraine signed two project sharing agreements for extraction of unconventional gas and also issued a number of special permits for subsoil assets use on the areas with unconventional gas production potential. Such well known companies as Shell, which keeps on preparatory activities on Yuzivska area, Chevron, which continues negotiations on the operational agreement for shale gas production on Oleska area, and ENI, which plans shale gas extraction on licensed areas of Westgasinvest LLC, are involved in the projects.

Map of blocks and wells

Besides world major oil and gas companies smaller companies also demonstrate interest towards unconventional gas extraction in Ukraine. During the Forum Great East Energy (has licensed blocks on the east of Ukraine) and Viva Exploration (has licensed blocks on the west of Ukraine) presented their ongoing and future projects.

The largest Ukrainian gas extraction company PJSC “Ukrgasproduction”, according to Chief Engineer Oleksiy Nesterenko, also sees development of unconventional gas, including shale gas, extraction capabilities among its strategic goals and plans to improve the efficiency of large scale hydrofracking technology, e.g. by purchasing of high capacity pumping units and special software for modelling of hydrofracking process. As Oleksiy Nesterenko noted, the company today master horizontal wells drilling technology, hydrofracking technology, owns necessary drilling equipment, 3D seismic modelling technologies and has relevant scientific and technical personal. Therefore, if the potential of relevant areas will be justified based on geologic research and the projects will be economically feasible, the company is ready to participate in shale gas production projects.

It was also announced that State Service of Geology and Mineral Resources of Ukraine plans to auction additional 18 blocks for shale gas exploration. The first such auction will be held on 18 of July.

Georgiy Rudko

Georgiy Rudko

Georgiy Rudko, Head of the State Commission for Mineral Resources of Ukraine, declared during his presentation that technically recoverable unconventional gas resources (shale gas and tight sand gas) in Ukraine constitute to 1-1.5 trillion cubic meters. Additionally, technically possible to extract 3.7 trillion cubic meters of coal bed methane. Apart from Donetsk-Dnipro basin on the east of Ukraine and Lviv-Lublin basin on the west of Ukraine, Georgiy Rudko admitted the possibility of unconventional gas extraction on the south of Ukraine, in particular he noted the potential of Black Sea shelf gas hydrates resources development (at least 7 trillion cubic meters).

The Head of the State Commission for Mineral Resources of Ukraine announced some preliminary estimates of expected unconventional gas extraction cost in Ukraine:

  • USD 190-300 per 1000 cubic meters for tight sand gas;
  • USD 206-350 per 1000 cubic meters for shale gas;
  • USD 290-400 per 1000 cubic meters for coal bed methane.

The Economics Of Unconventional Gas Extraction Projects

In the opinion of Dmytro Fedoruk, Clifford Chance Counsel, the first steps needed for moving forward unconventional gas extraction projects are stoppage of armed clashes and stabilization of the situation in the country, as well as increasing transparency in terms of regulatory procedures. Besides, taking into account the difference between conventional and unconventional gas extraction processes it is important to develop some basic requirements for unconventional gas extraction projects. Such requirements could be introduced in the new Subsoil Code of Ukraine and in the updated Rules of Oil and Gas Fields Development.

Other important issues discussed during the forum include the importance of collection, appropriate storage and providing access to geological information, liberalization of geological information export procedures, simplification of bureaucratic control and inspection procedures. Besides, development of internal market of servicing companies (drilling services, well intensification services, e.g. hydrofracking, supply of equipment and materials etc.) and availability of sufficient number of skilled local professionals will also play an important role in streamlining unconventional gas extraction projects.

Besides regulatory and technological barriers, an important factor of unconventional gas extraction projects success will be the support of such projects from the society and local communities.

Deputy Country Chair of Shell in Ukraine Oleksiy Tatarenko noted, that to improve public perception of unconventional extraction projects the cooperation of business, power authorities and civil society is very important. According to Oleksiy Tatarenko, the academic circles should play significant role in the development of such cooperation as the discussion should be based on real facts, but not on emotions.

“Our company makes a lot of efforts to encourage such dialog in Ukraine. We have organised dozens of visits to our well drilling site for media, civil society representatives and scientists. We have also organised several visits to our well sites in Pinedale and Marcellus in US”, – Oleksiy Tatarenko commented on the company’s activities to develop the dialog with civil society. Oleksiy Tatarenko believes, that the dialog with civil society on unconventional gas extraction issues is possible, it moves forward in Ukraine and despite some challenges goes in the right direction.

Time will demonstrate whether Ukraine will manage to become one of the pioneers in unconventional gas extraction in Europe. All preconditions for this are in place, however successful exploration wells, which will prove the possibility of gas extraction using currently available technologies and following environmental protection requirements and provide commercially feasible gas flows, are needed to provide the clarity on the future of unconventional gas projects in Ukraine.

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