Ukraine, Shell ink $10 bn shale gas deal

Ukraine and the global oil giant Royal Dutch Shell signed Thursday a $10 billion shale gas production sharing agreement aimed at helping the ex-Soviet nation ease its dependence on Russia.

Ukrainian President Viktor Yanukovych and Shell CEO Peter Voser signed the deal on the sidelines of the World Economic Forum in Davos, a gathering of the world's business and political elite.

Earlier Thursday, Ukrainian Energy Minister Eduard Stavitsky put the value of the deal at $10 billion.

Yanukovych said the deal was "only the beginning" and vowed: "From now on we will also be able to find a flexible method of co-operation that will add value to both our countries' economies."

The prime minister of The Netherlands, where Shell is based, said he wished "every success" to the new venture and praised the firm.

"Despite the fact it is a company that has been established a long time ago, it is still at the forefront of entrepreneurship," Mark Rutte said.

The Ukrainian government estimates the eastern Donetsk location may hold three trillion cubic metres (100 trillion cubic feet) of natural gas -- enough to last the nation of 46 million people 70 years at current consumption rates.

The Shell deal comes amid an upsurge of foreign interest in Ukrainian shale gas -- tapped by a controversial process known as fracking -- after the industry took off in North America.

Some forecasts suggest that Ukraine alongside countries such as France and Poland may hold some of Europe's largest shale rock deposits.

Voser said it was a "very important day for Shell" and acknowledged it was a "big step" for his firm.

Stavitsky said earlier Ukraine will be able to completely break its energy dependence on Russia should shale gas production proceed as envisioned under the deal.

"If we follow the optimistic scenario, our existing (energy) deficit problems will be solved," the energy minister said.

Ukraine lacks the technology to reach the deep-buried shale rock holding the gas and continues to rely heavily on gas imports from its eastern neighbour Russia.

It hopes to renegotiate the terms of a 10-year gas deal it signed in 2009 with Russia that sets high purchase prices.

But Moscow has set Ukraine's membership in a loose Moscow-led trade body as a precondition and also wants partial ownership of Ukraine's gas pipeline and distribution network.

No deal has been reached despite more than two years of talks.

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