London — Ukraine is planning to hold a landmark international bidding round for the rights to explore at some 30 license areas throughout the country as Kiev seeks to boost its domestic natural gas production and reduce its import dependency.
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According to the State Service of Geology and Subsoil, the round will be held in late February or early March on a bespoke electronic platform to ensure full transparency.
Ukraine's gas production has been steady at some 20 Bcm/year for the past 25 years, but it has vast untapped potential in its onshore blocks -- both for conventional and unconventional resources -- as well as in the Black Sea.
Speaking this week at Ukraine Week in London, gas industry officials said a transparent licensing round was needed to kick-start exploration in the country whose gas resources are estimated at almost 1.4 Tcm.
Ukrainian parliamentarian Olga Bielkova, deputy head of the energy committee in the Verkhovna Rada, said increasing domestic production was critical to Ukraine's future.
She said that in the lead-up to Ukraine's presidential election in March next year, there would be a focus on the gas sector among the candidates, which include former Ukrainian prime minister Yulia Tymoshenko.
"Every politician has always promised cheap gas, but now all will say we can increase our domestic production," Bielkova said.
Bielkova said Ukraine was working toward creating stable fiscal conditions and improving regulation around transparency to encourage more domestic production and reduce imports -- which currently all come from Europe.
"Never again will we come back to the mantra of cheap gas from Russia," she said.
Bielkova also said that while renewables had a small part to play in Ukraine's energy mix, there was nothing to replace gas in the country's heating and industrial sectors for at least 20 years.
Ukraine has struggled to attract investors into its upstream in recent years, not least due to the ongoing conflict in the east of the country.
International majors such as Chevron and Shell came to Ukraine in the early 2010s in an attempt to develop the country's unconventional gas resources, but none remain.
Naftogaz CEO Andriy Kobolev said part of the problem had been a lack of transparency in license awards in the past few years, with small companies being granted exploration permits for greenfields that could be considered beyond their capacity to develop.
Kobolev said it was unlikely Ukraine would achieve its aim of gas self-sufficiency any time soon as a result.
"There was a plan to achieve [gas] independence in 2020, but I think it won't surprise anyone if I say that this plan does not look realistic," Kobolev said.
Kobolev said Naftogaz was trying to develop a tight gas play, and had had some success. "But we don't have access to big new areas," he said.
"Until we fix the tendering process, we will not reach independence as easy as that," he said.
Viktor Gladun, managing director of JKX Oil & Gas' Ukraine subsidiary, said another way to boost Ukraine's domestic production was by privately owned companies taking over abandoned wells from state companies.
Gladun said it had already taken over some wells, paying the state companies -- such as Naftogaz, UkrGasVydobuvannya (UGV) and UkrNafta -- a fee. "It is a win-win situation," Gladun said.
He also called on the Ukrainian government not to change the fiscal regime. "We need a sustainable regime," he said.
Ukraine also enjoys an attractive gas price, with the current wholesale price around $10.80/MMBtu, according to Roman Opimakh, head of Ukraine's gas producer body, the AGPU.
Opimakh also said Ukraine enjoyed a mature gas infrastructure, with many active drilling rigs and existing labor force.
"New discoveries can be rapidly developed and you don't need to start everything from scratch," he said.
Alastair McBain, president of Arawak Energy, said Ukraine should also overhaul its legal framework and develop a new subsoil law.
He warned that Ukraine was still a "high-risk" country to explore for gas, but said that "those who dare may well win."
Bielkova added that she could not offer investors an "easy life", but that the Ukrainian system was "workable and orderly."
--Stuart Elliott, email@example.com
--Edited by Maurice Geller, firstname.lastname@example.org