Monday, May 9, 2011

Ukraine Looks to Texas for Path to Energy Independence -

This former Soviet state in Eastern Europe is betting that the path toward energy independence runs through Fort Worth.

By drilling in the scrubland and vacant lots in and around the city of Fort Worth, American energy companies have demonstrated that they can produce natural gas economically from shale — a form of sedimentary rock previously considered all but worthless.

Now, despite environmentalists’ opposition to the water-polluting potential of the shale-gas extraction method known as fracking, the technology’s proponents are heading abroad. And Ukraine, which sits atop tantalizingly large shale deposits, is eager to do business.

Already this year, Ukraine has opened talks with three Western energy giants — Exxon Mobil, Chevron and Shell — to search for shale gas. Ukraine’s Parliament has also passed investor-friendly legislation aimed at opening its domestic natural gas market to shale gas producers.

Meanwhile, the nation’s president, Viktor F. Yanukovich, has signed a shale-gas exploration agreement with the United States and reached an accord with the European Union on energy transport that opens Ukraine’s pipeline system to Western companies.

Along with the energy companies courting it, Ukraine sees shale as potentially altering the geopolitics of natural gas, lessening global reliance on Russia and the Middle East. Today, just three countries — Russia, Iran and Qatar — hold 54 percent of the world’s conventional gas reserves. But shale is found in many other places, including Eastern and Western Europe, India, China and Australia.

A 2009 study by the International Energy Agency estimated the world holds nearly as much gas recoverable through new techniques like shale gas, or another known as coal-bed methane, as through the traditional sort obtained by conventional drilling. The agency estimated there might be 380 trillion cubic meters of natural gas that could be recovered through these new techniques, compared with 404 trillion cubic meters obtainable through traditional means.

The energy agency has also predicted that unconventionally produced gas will rise from 12 percent of the global total in 2008 to 19 percent in 2035.
Right now, Russia produces about 40 percent of the natural gas imported into the European Union, selling it mostly under long-term contracts that are linked to the price of oil — which has been soaring lately.

Gazprom says its average wholesale price in Europe in the first quarter of 2011, the latest figures available, was $346 for 1,000 cubic meters. By comparison, the benchmark price for natural gas in the United States at the Henry Hub in Louisiana last month averaged $153.30 for the same volume.

Ukraine’s national energy company pays 30 percent less than the European rates, through an agreement Mr. Yanukovich signed last year to let Russia use a naval base on the Crimean Peninsula for 25 years. But that is still higher than the price in the United States.
Poland is three or so years ahead of Ukraine in its shale gas industry, with exploration wells already drilled. But it is less sensitive to Gazprom’s monopoly, because Poland consumes far less gas than Ukraine..
Production from Barnett has grown in a decade from almost nothing to 133 million cubic meters a day.
Exxon Mobil, which bolstered its unconventional gas expertise with the purchase of the American shale developer XTO last June, signed a memorandum of understanding with the Ukrainian government earlier this year, formalizing negotiations to begin exploring or drilling. XTO was a pioneer of the Barnett shale.
The New York Times

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