Ukraine and Shell Sign Production Sharing Agreement

By David Lee

Jan 25, 2013 08:50 AM EST

A production sharing agreement was signed between Ukrainian government and the Royal Dutch Shell. According to the agreement, Shell and Ukrainian state company Nadra Yuzivska have equal shares in the enterprise - 50 percent.

"A new project has been born. This is just the beginning, we shall continue this cooperation," commented Ukrainian President Viktor Yanukovych at the January 24 signing of the agreement in Davos, Switzerland. The document is supposed to promote investment to Ukraine, help increase domestic gas production, create jobs, lift the economy, and boost state budget revenue.

Reuters emphasizes the 50-year contract is "the biggest contract yet to tap shale gas in Europe," noting that the USD 10 billion deal is a significant step on the road to energy independence from Russia. Reportedly, Ukraine possesses 1.2 trillion cubic meters of shale gas - third largest deposits in Europe.

Shell won the right to explore gas in Yuzivske gas field in Eastern Ukraine in May 2012. In August 2012, Shell, ExxonMobil, Romanian OMV Petrom, and Ukrainian state company Nadra received joint rights to develop underwater deposits at Ukrainian deep marine shelf field under the Black Sea. 

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