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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

From memorandum to result

Mykhailo HONCHAR: The “Ukrainian shale gas revolution” thesis will be debunked or proven no earlier than in 2013
24 February, 2011 - 00:00
Shale DRILLING IN THE US / Photo from the website wikimedia.org

Last week saw an important event for the country’s energy sector. During the third meeting of the US-Ukraine Strategic Partnership Commission, Naftohaz Ukrainy NJSC and ExxonMobil (US) signed a memorandum on cooperation in prospecting for non-conventional energy sources.

The official consent of one of the US’s biggest energy companies to participate in the Ukrainian shale gas project can be interpreted as a gesture of trust in our government’s plans to “break loose” from the monopoly of Russian energy resources.

Russia immediately expressed its position on this idea. “Any hopes for slate gas to become a lifesaver that will free Ukraine from its gas dependence on Russia are groundless,” said Sergei Komlev, head of Contract Structuring and Price Formation at Gazprom Export Ltd., during a roundtable discussion under the heading “Current Problems of the European Energy Sector.” The Day asked Mykhailo HONCHAR, director of energy programs of Nomos Center, to share his opinion on the shale gas agreements.

What do you think of the results of the US-Ukraine working group for energy security, which finished talks in Washington DC, last week?

“It’s too early to speak about achievements. It is the first time that energy has been included in the agenda in the framework of the intergovernmental dialog designated by the Ukraine-US Charter on Strategic Partnership of 2008, although a relevant standpoint concerning ‘the intention of initiating a bilateral group for energy issues’ was clearly stated in this document.

“There have been no serious breakthroughs on energy issues; this year’s discussion on energy problems was a sort of a ‘testing the temperature.’ In my view, the agreements concerning assistance on the part of American companies in prospecting for non-conventional gas fields, are of more virtual nature so far.”

But why won’t you consider the signing of the memorandum on cooperation in prospecting for non-conventional hydrocarbons in Ukraine by Naftohaz Ukrainy NJSC and ExxonMobil as a definite positive result?

“The Ukrainian tradition of signing memoranda, just to ignore them later, is common knowledge. At that time I was in Washington DC, where I took part in discussions concerning the problems of Ukraine-US partnership on the level of non-governmental experts, so I can point out certain things.

“The American party in this sphere looks at Ukraine rather skeptically and distrustfully — because, unlike Ukrainian officials who sometimes suffer from amnesia, their American counterparts very well remember the outcome of the cooperation involving the ‘European’ use of the Odesa-Brody pipeline, the construction of nuclear fuel plant designed by Westinghouse, or the Vanco Energy pilot project for developing the Kerch area of the Black Sea shelf. American officials very well remember the names of their Ukrainian counterparts who helped them create American companies’ ‘history of fai-lure’ in Ukraine. And the political co-loring of each particular government official has nothing to do with it.

“Therefore, the ExxonMobil memorandum rather outlines joint interests. So far, the American company will treat the Ukrainian project very cautiously. You won’t even find any information on the Naftohaz memorandum on its official site (at least, this was the state of things at the end of last week, when press releases on other important events began to appear: there was not a single comment on this issue).

“In my view, a certain element of trust will already start to appear at the initial stage, as American companies start obtaining relevant permissions and licenses for exploratory work. In order to gain trust, we must make this process as transparent and fast as, for example, our neighbors in Poland did. I would like to remind that ExxonMobil takes part in prospecting for shale gas resources in that country, but for that it did not have to make pompous declarations, nor did other American and European companies that had come to Poland to prospect for shale gas. Also, in this context we should remember that Americans will definitely compare the favorableness or unfavorableness of Ukrainian conditions with what they have seen in Poland. And if the comparison is not to our advantage, they will simply withdraw from Ukraine and concentrate on the Polish project, where they also have a time margin.”

How long do you think will it take before the actual mining of shale starts?

“Exploring [with the goal of producing] a preliminary assessment of available promising shale gas resources will take about two years. The evaluation of commercial gas resources, impact of formation, effect of pressure technologies on the environment, and business planning on production will take another three to five years. And a minimum of three years is necessary to create the infrastructure for shale gas mining and transporting (in case the previous two stages are successful) and start drilling. All this means that the real result of the Ukraine-US agreement will not be visible before 8 or 10 years have passed. And this can be considered a tight schedule.”

So do you think Ukraine will see a shale gas revolution, which has already spread over the US and Poland?

“The period from 2002 to 2009, dubbed the ‘shale gas revolution’ in the US, crowned the evolutionary efforts made by certain companies since the 1980s. Poland is not yet overwhelmed by this revolution. Polish experts make very cautious statements concerning the prospects of shale gas, because they do not have trustworthy data on them. ExxonMobil started prospecting in Eastern Poland in the fall of 2009, so the results can be expected this year or early in 2012.

“As far as Ukraine is concerned, there has been no sound exploration for shale gas. Moreover, the resources of saturated gas and kerosene shale were not even registered, as of January 1, 2009. Therefore it would be premature to speak of huge prospects then and there. In my view, if the Ukraine-US cooperation develops successfully, the thesis about the oncoming ‘shale gas revolution in Ukraine’ will be debunked or proven no earlier than 2013, when relevant research has been done.”

By Natalia BILOUSOVA, The Day
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