Ukraine signs $10 billion shale deal with Chevron

Reuters
A Chevron gas station is pictured in Encinitas, California
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A Chevron gas station is pictured in Encinitas, California July 28, 2011. REUTERS/Mike Blake

KIEV (Reuters) - Ukraine signed a $10 billion shale gas production-sharing agreement with U.S. energy major Chevron (CVX) on Tuesday in the country's second such deal this year.

"It's been signed," Energy Minister Eduard Stavytsky told journalists, referring to a deal for exploration and extraction of shale gas at the Olesska field in western Ukraine.

Last January, the ex-Soviet republic signed a deal with Royal Dutch Shell (RDSA.L), at a similar level of investment, for exploration at Yuzivska in eastern Ukraine.

Ukraine, through shale, offshore and liquefied natural gas development, aims to ease its dependence on costly natural gas imports from its main supplier, Russia, which weigh heavily on its economy.

The production-sharing agreement with Chevron - confirmed by an announcement on President Viktor Yanukovich's website - foresees an initial investment of $350 million by Chevron in exploratory work aimed at establishing the commercial viability of shale reserves at the 5,260-square-kilometre Olesska field.

Total investments, including extraction after exploratory drilling, are put at around $10 billion.

The two shale projects could provide Ukraine with an additional 11 billion to 16 billion cubic meters (bcm) of gas in five years' time, according to projections by the Kiev government.

(Reporting by Pavel Polityuk; writing by Richard Balmforth; editing by Jason Neely)

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