Ukraine could replace Russia
Ukraine could replace Russia

Ukraine could replace Russia

12:34, 05.03.2008
2 min.

Richard Edgar, the Calgary-based chairman of the only Canadian oil company with production in Ukraine, said the former Soviet bloc country has the political will and enough potential oil and natural gas of its own to become energy self-sufficient, or even a net exporter...

Junior oil and gas explorer Shelton Canada Corp. has a self-serving solution that might free Western Europe from its dependence on Russian gas.

Richard Edgar, the Calgary-based chairman of the only Canadian oil company with production in Ukraine, said the former Soviet bloc country has the political will and enough potential oil and natural gas of its own to become energy self-sufficient, or even a net exporter.

That might tip the energy supply balance in Europe away from Russia, which over the past two days has cut gas supplies moving west through Ukraine in yet another dispute with Kiev.

Видео дня

"The Ukraine would become a more dependent supplier to Western Europe (than Russia) and the monopoly Gazprom . . . would be broken," Edgar, a veteran Calgary oilman, said in an interview.

"You wouldn`t need to construct the Nabucco pipeline (a $6-billion US project to move gas from Turkey to Austria via Bulgaria, Romania and Hungary) nor some of the other lines from Central Asia now being contemplated. You`d use a lot of Ukraine`s existing infrastructure."

The tiny firm with offices in Calgary and Toronto is listed on the TSX Venture Exchange and its executive team spent last week selling the firm`s story to Calgary-based investment banks, with an aim to begin raising cash to fund growing operations onshore in the East-Central Ukraine`s Dnieper-Donets oil basin and offshore in the Azov and Black seas.

Within days of the road show ending, most of Western Europe was watching a standoff between Ukraine and Russia`s OAO Gazprom threaten a quarter of the continent`s gas supply, potentially sending prices for the fuel through the roof in places such as Germany and France.

The pricing disagreement, in which Gazprom says Ukraine owes it $600 million US, led to the Russian gas giant cutting supply to Ukraine by 50 per cent Tuesday, with Ukraine`s state-owned energy company Naftogaz saying it might have to tap into those supplies for its own domestic use if Russia cuts back any more.

The same scene played out two years ago and there is sure to be a new round of calls within Europe for reliable alternatives.

"Europe`s energy supply now depends on how much gas Ukraine has in storage and if they can find a solution before it runs out," said James Beadle, portfolio manager at Pilgrim Asset Management in Moscow.

Edgar admitted both Ukraine and Shelton Canada have relatively colossal tasks ahead if Ukraine is ever to cut into Russia dominant position as an energy supplier to Western Europe.

Shelton`s production today from its joint-venture Lelyaki oil project alongside partner Ukrnafta, a division of Naftogaz, is only about 350 barrels a day before the government takes a 45 per cent royalty share.

The company is also an even partner with Naftogaz in an offshore gas project called North Kerchenskaya in the Azov Sea, but production of the field`s estimated 170-billion cubic feet of recoverable gas isn`t slated to begin until 2010.

Meanwhile, Ukraine, whose onshore fields were quickly tapped and then abandoned in the late 1970s when when the former Soviet Union found even larger reserves in Siberia, consumes far more fuel than it produces, roughly 126-million barrels of oil and 2.7 trillion cubic feet of gas annually.

The country now produces 37.8-million barrels of oil a year and a little more than one trillion cubic feet of gas, and exploration and field development work is done mostly with old Soviet equipment and drilling rigs that in some cases date back to the 1940s.

The country has a proven reserve base of some 387-million barrels of oil and 39-trillion cubic feet of gas, and majors such as Royal Dutch Shell Plc. and Marathon Oil Corp. recently arrived to pursue onshore shale gas and potentially large oil reservoirs in the deepest parts of the Black Sea.

"I don`t think there are huge onshore fields left to find but offshore Black Sea is new frontier," Edgar said.

"Onshore, these pools went into decline and kept going but never had the benefit of technologies seen in the west to try to rehabilitate or exploit them fully. We hope the service industry will follow us in but it won`t before the producers are in there doing the kind of work we are today."

By Jon Harding, Calgary Herald

Loading...
We use cookies
Agree!