Ukraine launches third phase of landmark exploration round

20 березня 2019

London — Ukraine has launched the third phase of its landmark international bidding round, part of the country’s efforts to boost domestic gas production and reduce its import dependency.

In the third phase, nine onshore blocks are being offered — unexplored blocks with no resource estimates — with the auction set to take place on June 18.

It follows a first round auction earlier this month — the first of its kind — which saw three blocks awarded out of 10 on offer.

A second round — due to take place on May 2 — is offering a further seven blocks.

The total 26 blocks offered leaves four for future auction out of the original 30 earmarked for sale.

In addition to the auctions, the government is also offering nine onshore blocks under production sharing agreement (PSA) tenders.

The nine blocks cover a total area of 11,600 sq km, with winning bidders to be announced in June.

“The third round of online auctions has been launched with nine onshore blocks offered in three regions of Ukraine, covering over 1,260 sq km,” the Association of Gas Producers of Ukraine said.

All licenses are for a period of 20 years.

Earlier this month, Ukraine awarded exploration licenses for three onshore blocks following the first phase of the round to private Ukrainian upstream companies Burisma and DTEK, and the country’s biggest gas producer, state-owned UkrGasVydobuvannya (UGV), a subsidiary of Naftogaz Ukrayiny.

The blocks awarded were the Dubrivsko-Radchenkivska block in the Poltava region and the Svitankovo-Lohivska and Pivdenno-Kobzivska blocks in Kharkiv.

SELF-SUFFICIENCY

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.

While looking to produce more gas domestically, Ukraine also wants to eliminate imports, which currently all come from Europe after the government halted direct Russian gas purchases in November 2015.

Kiev has the ambition of achieving gas self-sufficiency in the coming years — raising production levels to meet gas demand currently running at some 28 Bcm/year.

But Ukraine has struggled to attract international investors into its upstream in recent years, not least due to the 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.

The new auctions are being held on an open electronic platform to ensure full transparency following accusations of wrongdoing in previous contract awards to upstream companies in the country.