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Ukraine, ExxonMobil delay signing of PSA on Black Sea field

Highlights

Ukraine and an ExxonMobil-led consortium postponed by at least a month until January 2014 the signing of the production sharing agreement on tapping a Black Sea natural gas field, Energy and Coal Industry Minister Eduard Stavytskiy said.

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The agreement, which was expected to be signed by the end of November, targets the offshore Skifske gas field that is expected to produce between 8 billion cubic meters and 10 billion cu m of gas annually.

'The agreement is ready,' Stavytskiy said at a press conference late Wednesday. 'We have moved [the signing] to January by mutual consent.'


Stavytskiy did not disclose the reason for the delay, but the government had been facing a major political crisis and massive street protests since November 21.

The protesters took to the streets after the government had refused to sign political association and free trade agreements with the European Union on November 29. Instead, President Viktor Yanukovych went to negotiate $15 billion bailout package and lower natural gas prices from Russia in a deal signed on December 17.

Russia has agreed to lower its gas price to Ukraine by 33% to $268 per thousand cu m in the first quarter of 2014 from about $402/thousand cu m that Ukraine paid in 2013.

Stavytskiy later said that the Russian gas price cut will not affect the ExxonMobil project or any other project that are expected to be profitable at lower prices.

Ukraine selected the ExxonMobil-led consortium at a tender in August 2012 to tap the Skifske offshore deposit, but spent more than a year in negotiations over the PSA.

Meanwhile, Ukraine will sign in January 2014 at the World Economic Forum in Davos a contract with Chevron that opens the way for development of shale gas deposits, Stavytskiy said.

A similar deal with a consortium led by Eni and EDF will be signed in February 2014, he said.

Eni and EDF, jointly with state-owned oil and gas company ChornomorNaftoGaz and a small private Ukrainian company, Vody Ukrayiny, plans to tap the Subbotina, Abikha, Mayachna and Kavkazska oil and gas fields offshore the Black Sea in the area of Kerch.

Prime Minister Mykola Azarov said in October that Eni and EDF will lead a $4 billion development project that annually would produce between 2 million mt and 3 million mt of oil equivalent annually by the year 2020.

Ukraine has been seeking to increase its output of natural gas to 44.4 billion cu m in 2030 from about 20 Bcm/year currently, according to the energy strategy recently approved by the government.

--Alexander Bor, newsdesk@platts.com