Ukraine selects Exxon-Shell-OMV-Nadra for Skifska
The consortium let by the international oil companies (IOCs) ExxonMobil and Shell with the contribution of OMV Petrom (OMV) from Romania and the Ukraine National Oil Company Nadra Ukrainy has been selected by the Ukraine Government to develop the Skifska natural gas field in the Ukraine continental shelf of the Black Sea.
In May 2012, the Ukraine Government had already selected two major companies, Shell in partnership with Chevron Corporation (Chevron) to explore and develop two large onshore prospects of shale gas fields.
In June 2012, Kiev issued calls for tender to international oil companies for the exploration and development of two offshore natural gas fields Skifska and Foroska located in Ukraine continental shelf.
In September 2012, Shell and the local Ukrgazvydobuvannia are due to start drilling the first appraisal well in Pervomaysky district of Kharkiv region assuming all the health, safety and environmental conditions of the site should meet Shell‘s requirements.
All these initiatives are part of Ukraine‘s policy to diversify its energy sourcing portfolio away from Russia causing regularly political tensions between the two countries and with some consequential damages in western Europe.
As a result Ukraine’s imports from Russia represents 64% of its natural gas consumption.
In opposite way, 80% of the Russian natural gas exported to Europe is going through Ukraine before connecting to distribution terminals and the network of European pipelines.
From this conflicting contest, Ukraine intends to explore and develop its own resources, while Russia is working on two giant pipelines to turn around Ukraine, the European pipelines to connect Russia to Germany directly across the Baltic Sea, and the South Stream Pipeline to link the Caspian Sea to southern Europe by 2016.
Skifska to represent 10% of Russia natural gas import
In this context, Skifska’s calls for tender organized by the Ukraine Government takes a particular importance among the stakeholders.
Only two teams of companies were bidding, Lukoil on its own and ExxonMobil in consortium with Shell, OMV and Nadra.
The Ministry of Environment and Natural Resources selected the group of international oil companies to award the license for Skifska.
Under the provisions that the final agreement should be closed, ExxonMobil and its partners should pay $300 million for this license and would benefit of a 50 years production sharing contract (PSC) agreement.
The Skifska field is located on the western part of the Ukraine Black Sea, along the territorial waters limit with Romania waters where ExxonMobil and OMV are already jointly exploring offshore gas fields.
This local experience of ExxonMobil and OMV provided the consortium with a significant advantage on the exploration conditions and field development optimization.
For this reason and its shares in the consortium, ExxonMobil should be the operator of the Skifska project.
On this base, Skifska should produce 5 billion cubic meters per year along the 50 years of the production sharing contract.
The exploration and development of Skifska offshore natural gas field should require $10 billion capital expenditure reflecting numbers of technical challenges to overcome.
In that respect the consortium let by the majors ExxonMobil and Shell with the local companies OMV Petrom and Nadra Ukrainy is the perfect combination of world state-of-art technology expertise and local experience to develop Skifska and provide Ukraine with energy alternative.