Ukraine's state-run energy firm Naftogaz and US oil major ExxonMobil have signed a memorandum to cooperate on searching for shale gas deposits in Ukraine. But Moscow warned Ukraine that shale gas "won’t help" the country reduce its reliance on Russia's gas.
Naftogaz announced that the memorandum had been signed last week (14-18 February) and ExxonMobil would also help Ukraine to look for methane gas deposits in coal mines, Reuters reported.
Ukraine, which is largely dependent on imports of Russian gas, wants to increase domestic gas production and find alternative suppliers too.
Ukraine is also planning to open its first liquefied natural gas terminal in the Black Sea region in 2015, with a capacity of five billion cubic metres.
Ukraine imports about 60% of its domestic gas needs from Russia and has repeatedly said the gas price is too high for Ukrainian goods to compete on world markets.
At a public event held recently in Brussels, experts said that developing shale gas was very important for Poland and Ukraine, countries which are rich in coal but have no gas resources.
No magic wand
The shale gas deposits that Ukraine hopes to find and develop won't reduce its reliance on gas from Russia, said Sergei Komlev, head of Gazprom's export pricing department, quoted by Interfax Ukraine.
"There is no point in hoping that shale gas will be the magic wand that ends Ukraine's dependence on gas from Russia," Komlev said.
Ukraine's shale gas resources are estimated to total two trillion cubic metres, which represents technically recoverable reserves, not proven reserves, the Gazprom official claimed, adding that the figure had had "a dazzling effect" on the public.
Shale gas currently costs more than $200 per 1,000 cubic metres or $6 per million British thermal unit (BTU) to produce, although gas is priced at no more than $4 per million BTU ($160 per 1,000 cubic meters) at Henry Hub.
Shale gas producers are surviving thanks to hedging against a drop in price below $6-$7 per million BTU, Komlev further said.
He added that fewer and fewer companies were able to use such technology.
Shale gas, produced from layers of sedimentary rock that are difficult to tap into with conventional technology, was recently developed in the USA and made the country self-sufficient in gas, even bringing down world prices.
In recent statements, Gazprom officials have shown disdain for shale gas and cited the possible negative environmental impact of developing such technologies.
Specialists see the strategic importance of developing shale gas in Europe as a means of reducing the continent's dependence on Russian imports. Some have argued that developing shale gas is even more important for Ukraine, a country which has no gas resources of its own but is rich in coal.
Shale gas is just one of the three unconventional gas technologies. Coal-bed methane, or CBM, is a form of natural gas extracted from coal beds, while tight gas comes from sandstone.