Ukraine's Naftogaz Acquires Shale Gas Block

Ukraine's Naftogaz is set to acquire rights to a shale gas block straddling the border between the eastern Donetsk and Kharkov regions that was previously explored by Shell, the company said on December 18.

The national gas producer has reached a deal to buy a 99% stake in Nadra Yuzivska, the operator of the Yuzivska block and a subsidiary of state exploration company Nadra Ukrainy. It will have an option for the remaining 1%.

The deal, which needs approval from Ukraine's antimonopoly committee, will pave the way for the Yuzivska block's development, Naftogaz CEO Andriy Kobolev said. The project has been on hold for several years.

"We see in this area a great potential for increasing the company's hydrocarbon resource base," he explained. "On the other hand, we already have extensive experience and unique expertise, as we operate in the immediate vicinity of the site."

Shell signed a production-sharing agreement to develop the Yuzivska site in 2013, only to pull out two years later, citing disappointing drilling results. At the time of its exit, eastern Ukraine was in the grip of intense fighting between government forces and Russia-backed rebels. The conflict, though less fierce, continues.

Ukraine is hopeful that it can become self-sufficient in gas by developing its conventional and unconventional resources and has awarded dozens of licences to Naftogaz and other operators in recent years to spur investment.