Ukraine to promote latest gas blocks after lukewarm interest to date

London — Ukraine -- which this year has opened up vast swathes of acreage for exploration as it looks to boost its domestic gas production -- will next week look to attract interest in three more blocks offered under its production sharing agreement (PSA) regime.

New exploration in Ukraine has been hampered in the past by the lack of a transparent licensing process and concern over political instability, but a new online auction tool was seen as bringing new transparency to the process.

However, despite five auctions for blocks and a first PSA tender held in June, only 28 out of 43 blocks offered have been awarded to date, with only four blocks awarded to international bidders.

A second PSA tender process is now underway for three blocks in the prolific Dnipro-Donetsk basin -- Grunivska, Okhtyrska and Ichnyanska.

The original deadline for bids was November, but the Ukrainian government has opted to extend the deadline to February 4, 2020, in an attempt to garner more interest.

Details of the blocks are to be presented at an event in London on December 11.

"All the blocks are located in Dnipro-Donetsk basin, which is a proven petroleum province with a well-developed midstream infrastructure," Roman Opimakh, head of the State Service of Geology and Subsoil of Ukraine, said.

SCANT INTERNATIONAL INTEREST

The work this year to license new exploration blocks is designed to help Ukraine boost its domestic gas production as the government looks to eliminate imports, which currently all come from Europe after it halted direct Russian gas purchases in November 2015.

But there has only been limited international interest and no majors have taken acreage so far despite hopes that the likes of Shell, Italy's Eni and US major Chevron might be tempted back to the country.

In its latest online auction held on October 30 just two blocks were awarded out of five on offer.

Nafta RV -- part of the Czech EPH group -- won one block, while Ukraine-based Nadra Carbon won a second.

In the four auctions held ahead of the October round, a total of 19 blocks were awarded, with state-owned producer UkrGasVydobuvannya (UGV) taking 14 and private explorers Burisma, DTEK and Yedyna winning one license each.

Ukraine, whose gas production has been steady at some 20 Bcm/year for the past 25 years, has vast untapped potential in its onshore blocks -- both for conventional and unconventional resources -- as well as in the Black Sea.

Alongside the online auctions, Ukraine in June awarded nine PSAs, including to international players Vermilion Energy from Canada and US-based Aspect Energy.

DOLPHIN BLOCK

The government earlier this year also decided to cancel the PSA tender for the vast Dolphin block in the country's sector of the Black Sea.

The tender for a 50-year Dolphin PSA was launched in April and attracted a number of bidders, including three from outside Ukraine, by the June 12 deadline.

Originally it was decided to relaunch the tender, but the government opted to cancel it altogether.

The block was the only offshore acreage offered in Ukraine 's wide-scale initiative in 2019 to license numerous sites for exploration through bidding rounds and a PSA process.

Source: AGPU