Shell sign agreement on hydrocarbon production

The Ukrainian government and Royal Dutch Shell have signed an agreement on operating activities regarding a production sharing agreement for hydrocarbons to be extracted on the Yuzivska area, the government portal has reported.

"This is directly an agreement that fully grants permission to investment and work on the Yuzivska area. Royal Dutch Shell now actually and legally begins its work in Ukraine," Energy and Coal Industry Minister Eduard Stavytsky said.

He said that according to the signed production sharing agreement, at the first stage Royal Dutch Shell will invest around $500 million in geological exploration, whereas the company's total investment in commercial development and construction of communications on the Yuzivska area is estimated at $10 billion.

Stavytsky recalled that under the agreement, depending on the volume of production, from 30% to 60% of gas will belong to the state. However, the proportion between investors Royal Dutch Shell and Nadra Yuzivska will be fifty-fifty.

The minister noted that conventional natural gas, shale gas and gas from tight sandstones would be extracted within the Yuzivska area.

According to Stavytsky, tender procedures begin after the signing of an operating agreement, in which, under the terms of the contract, Ukrainian experts in geophysical and seismic work will be involved. The minister noted that respective work would be completed by the end of this year.

Stavytsky said that the first free gas from the Yuzivska area was expected in late 2014. "Gas production will practically start in 2015," the minister said.

As reported, the Yuzivska area is located in Donetsk and Kharkiv regions. According to Royal Dutch Shell experts, projected gas reserves are estimated at 3-3.5 trillion cubic meters of gas.

Adapted from ukrinform