1/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
by Lyubomyr Goncharuk Adviser to the
Minister of Ecology and Natural Resources of Ukraine
Overview of the Ukrainian Oil & Gas and Shale Gas
Market Opportunities
2/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
CONTENTS 1. Reserves & Resources 2. Production & Consumption 3. Opportunities
3/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
1. Reserves & Resources
UKRAINIAN SHIELD
Azov Sea
Black Sea
Kyiv
200 km
Dniprovsko-Donetska Depression
Crystalline basement slopes
Voronezhska
AnticlineLvivskiy Trough
Volyno-Podilska
Plate
Donbas
Fore-Dobrugean
Trough
Fore-Crimean Depression
Fore-Carpathian Trough
Folded CarpathiansTranscarpathians
ScythianPlate
Mountain
Crimea
4/25
Canada - Ukraine Oil & Gas Opportunities
Workshop, Kyiv February 25-26, 2013
Oil & Gas 1/2
Four oil and gas provinces are recognized in the country, including 11 oil-gas basins and 35 prospective areas. Hydrocarbon deposits are being
exploited for oil, gas, and condensate in the following regions:
• A – the Eastern Region (Dniprovsko-Donetska Depression and northwestern portion of Donbas);
• B – the Western Region (Volyno-Podilska Plate, Fore-Carpathians, Folded Carpathians, and Trans-Carpathians);
• C – the Southern Region (Prychornomorya, Crimea, and the exclusive marine economic zone of the Black Sea and Azov Sea offshore).
A B
C
UKRAINIAN SHIELD
Azov Sea
Black Sea
Kyiv
200 km
Dniprovsko-Donetska Depression
Crystalline basement slopes
Voronezhska
AnticlineLvivskiy Trough
Volyno-Podilska
Plate
Donbas
Fore-Dobrugean
Trough
Fore-Crimean Depression
Fore-Carpathian Trough
Folded CarpathiansTranscarpathians
ScythianPlate
Mountain
Crimea
5/25
Canada - Ukraine Oil & Gas Opportunities
Workshop, Kyiv February 25-26, 2013
High
Low
Medium
Oil & Gas 2/2
In 2011, production amounted to 2.4 million tons of oil, 0.9 million tons of condensate,
and 20.6 billion cubic meters of natural gas.
The State Inventory includes 187 oil deposits (121 in production), 202 condensate
deposits (142 in production), and 380 natural gas deposits (224 in production).
Proven and probable reserves are estimated to:
• 133 million tons of oil • 66 million tons of condensate • 1 trillion cubic meters of natural gas
UKRAINIAN SHIELD
Azov Sea
Black Sea
Kyiv
200 km
Dniprovsko-Donetska Depression
Crystalline basement slopes
Voronezhska
AnticlineLvivskiy Trough
Volyno-Podilska
Plate
Donbas
Fore-Dobrugean
Trough
Fore-Crimean Depression
Fore-Carpathian Trough
Folded CarpathiansTranscarpathians
ScythianPlate
Mountain
Crimea
6/25
Canada - Ukraine Oil & Gas Opportunities
Workshop, Kyiv February 25-26, 2013
A
B
Coalbed Methane
This is potentially an important non-conventional additional hydrocarbon
resource confined to coal deposits in the Donetskiy (A) and Lvivsko-Volynskiy (B)
coal basins.
The State Inventory comprises 200 deposits, of which 99 are in production.
Proven and probable reserves of methane are estimated at 343 billion cubic meters.
In 2011, production totaled to 760 million cubic meters of methane.
UKRAINIAN SHIELD
Azov Sea
Black Sea
Kyiv
200 km
Dniprovsko-Donetska Depression
Crystalline basement slopes
Voronezhska
AnticlineLvivskiy Trough
Volyno-Podilska
Plate
Donbas
Fore-Dobrugean
Trough
Fore-Crimean Depression
Fore-Carpathian Trough
Folded CarpathiansTranscarpathians
ScythianPlate
Mountain
Crimea
7/25
Canada - Ukraine Oil & Gas Opportunities
Workshop, Kyiv February 25-26, 2013
Nevertheless, reconnaissance studies commenced last years in Donetskiy (A) and Lvivsko-Volynskiy (B) coal
basins as well as Dniprovsko-Donetska (C) and Prychornomorska (D) depressions and Fore-Carpathian
(E) and Fore-Dobruja (F) troughs (fold belts).
A
B C
D
E
F
Shale Gas
Non-conventional shale gas resources are not recorded yet in the State Inventory being preliminary estimated to
some trillions of cubic meters.
Up to recent no research and practical exploration were conducted in Ukraine.
In 2012, the shale gas field tender has been organized for two sites located in the
areas A and B. The permits for 50 years of exploration and production granted to Shell (A, Yuzivska field, 7886 km2) and
Chevron (B, Oleska field, 6324 km2), depth 10 km each. The total investments
required under PSA conditions are estimated to $3.7 bln. in Yuzivska field
and $3.1 bln. in Oleska field.
UKRAINIAN SHIELD
Azov Sea
Black Sea
Kyiv
200 km
Dniprovsko-Donetska Depression
Crystalline basement slopes
Voronezhska
AnticlineLvivskiy Trough
Volyno-Podilska
Plate
Donbas
Fore-Dobrugean
Trough
Fore-Crimean Depression
Fore-Carpathian Trough
Folded CarpathiansTranscarpathians
ScythianPlate
Mountain
Crimea
8/25
Canada - Ukraine Oil & Gas Opportunities
Workshop, Kyiv February 25-26, 2013
A
B
Coal
The State Inventory contains more than 900 deposits with proven and probable reserves, located in Donetskiy (A) and
Lvivsko-Volynskiy (B) coal basins, of which 400 are being exploited
underground.
Ukraine’s proven and probable coal reserves are estimated at 53 billion tons.
In 2011, production totaled to 69 Mt.
9/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
2. Production & Consumption
10/25
Canada - Ukraine Oil & Gas
Opportunities Workshop, Kyiv February 25-26,
2013
Hard Fuels(source: www.ukrstat.gov.ua)
61,7
59,5
55,0
59,8 59,460,4 58,9
55,0
61,8639
430
358395462
544559
449
50
52
54
56
58
60
62
64
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
Coal
, mln
. t
0
100
200
300
400
500
600
700
Peat
, th.
t
Coal, mln. t Peat, th.t
Liquid Fuels(source: www.ukrstat.gov.ua)
2,83,0
3,13,3 3,3
3,22,9
2,6 2,41,11,11,2
1,1
1,3
1,21,1
1,00,9
0
0,5
1
1,5
2
2,5
3
3,5
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
Crud
e O
ill, m
ln. t
0
0,2
0,4
0,6
0,8
1
1,2
1,4
Gas
Con
dens
ate,
m
ln.t
Crude Oil, mln. t Gas Condensate, mln.t
2003-2011
Ukraine mineral figures. Fuels
Gaseous Fuels(source: www.ukrstat.gov.ua)
18,6
20,7
19,8
19,2
20,2
20,6
20,119,9
19,6721
658
744745832 880
962867
950
17,5
18
18,5
19
19,5
20
20,5
21
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
Natu
ral G
as, b
ln.m
3
0
200
400
600
800
1000
1200
Oil-
Rela
ted
Gas
, m
ln.m
3
Natural Gas, bln. m3 Oil-Related Gas, mln.m3
11/25
Canada - Ukraine Oil & Gas
Opportunities Workshop, Kyiv February 25-26,
2013
Ukraine GDP and Government Revenue
(source: www.economywatch.com)
0
20
40
60
80
100
120
140
160
180
200
2003 2004 2005 2006 2007 2008 2009 2010 2011
YearsG
DP,
USD
bill
ion
0
100
200
300
400
500
600
Gov
ernm
ent
Rev
enue
, U
AH
bill
ion
GDP
Government Revenue
Ukraine mineral trends.
Growth & Breaks
2004 2006 2008 2010 2012
GDP, Revenue
flat-varying
descending
growingCoalPeat
Oil-related Gas
Crude OilNatural GasGas CondensateWorld Crisis
12/25
Canada - Ukraine Oil & Gas
Opportunities Workshop, Kyiv February 25-26,
2013
28%
5%
4%
7%2%2%
52%
iron oresiron ore concentratesiron castsoil & productsfertilizersnon-organic chemicalsnon-minerals
27%
6%
4%
8%3%3%
49%
iron oresiron ore concentratesiron castsoil & productsfertilizersnon-organic chemicalsnon-minerals
Ukraine mineral
sector export
2010
2011
Total - $51.4 bln
Total - $68.4 bln
Source: www.ukrstat.gov.ua
13/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Ukraine: some country figures
Country territory: 232 000 sq miles Population: 45 million
• Annual gas statistics (2011): Gas consumption: 2.08 Tcf, including:
Industry — 1.12 Tcf Public utilities — 0.96 Tcf
Import from Russia — 1.35 Tcf Production in Ukraine — 0.73 Tcf
Gas transit from Russia to Europe via Ukraine territory — 3.65 Tcf
14/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
• Domestic natural gas production — 721 Bcf /year • 676 Bcf — on-land production (in Ukraine) • 43 Bcf — offshore gas production
in Black Sea (6%)
• Offshore gas extraction facilities (Black Sea): • Two old offshore jackup rigs work in Black Sea
operate for over 15 and 20 years • Two new jack-up rigs bought in 2012, one of them
was put into operation on August 2012 (Naftogaz NJSC, Ukraine).
LNG: first LNG importation Terminal is being on project
feasibility stage.
Ukraine: gas production
15/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Ukraine: gas transportation and storage infrastructure High pressure pipelines - 23,600 miles Volume of natural underground gas storages — 1.12 Tcf
16/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
3. Opportunities
17/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Cabinet of Ministers of Ukraine
State Geological and Subsurface Survey of Ukraine
NADRA UKRAYNY NJSC • Geological exploration; • License coordination; • Cooperation with IOCs; • Oil and gas production.
Other geological
organizations
National Joint-Stock Company “Nadra Ukrayny”: the Hydrocarbon Vehicle of the State Geological and
Subsurface Survey of Ukraine
18/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
NADRA UKRAYNY NJSC: International activities
Visiting and Participation in oil and gas international conferences and exhibitions (including World Shale Gas-2010, 2011 and 2012 (Dallas, Houston, TX, USA);
Associate Member of American Gas Association (AGA)
Drilling equipment market research and visiting of leading manufacturers of drilling rigs and equipment (USA, Canada, China);
Cooperation with most of International Oil Companies for mutual activity in Ukraine (actual agreements and contacts with EXXON MOBIL, CHEVRON, SHELL, eni, PETROM, TOTAL, CNPC, PETROBRAS);
Consulting, project management in geology exploration for foreign companies;
Relations with World’s Leading companies engaged in offshore seismic exploration for their activity in Ukrainian sector of Black Sea (PGS, SGVeritas).
19/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Three options for cooperation between IOCs and Ukraine / NADRA UKRAYNY:
1. Production Sharing Agreement (PSA);
2. Foundation of Joint Venture with NADRA UKRAYNY for exploration and operation of concrete license areas.
3. Direct investments to some branch companies of NADRA UKRAYNY.
20/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Option 1: Production Sharing Agreement
Expected from NADRA:
Licenses, Available subsurface database (logs, seismic, core, analysis etc.); Local and legal support of project; Optionally - equipment and staff;
Expected from IOCs: Investments in form of equipment supply and money; Technologies, know-how; Optionally - equipment and staff.
Benefits to both parties: products, shared between parties in agreed proportion might be sold on active Ukrainian market.
Preferred by IOCs as traditional scheme for elaboration of large projects in raw regions. In Ukraine the PSA should be approved by Cabinet of Ministers, which takes up to 12 months.
Legal base: Ukraine Law about PSA #1039-XIV of 10.09.1999
21/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Not granted in 2012, moved to next round
of 2013
The PSA is signed at the World Economic Forum in Davos on Jan 24, 2013
22/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Option 2: Joint Venture with NADRA UKRAYNY
Legal base: number of Ukrainian laws starting from 1991 No coordination with Government, prompt start of project; Any selection of forms of investments from both parties (money,
equipment, licenses, database, staff, etc.)
First example: in June, 2012, Eni Group signed a Share Purchase Agreement with Nadra
Ukrayny National NJSC and Cadogan Petroleum Plc to acquire a majority interest and operatorship in Westgazinvest LLC, an Ukranian Company founded in 2012 by the Nadra and Cadogan holding, subsoil rights to 9 unconventional shale gas license areas, located in Western Ukraine within Lviv Basin, encompassing a total acreage of approximately 1,500 sq. miles.
23/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Option 3: Investments to NADRA’s branch companies
Very quick start of cooperation;
Preferable directions for investments:
- Buying of equipment (drilling rigs, service, seismic and geophysical equipment);
- Subcontract Execution of works including seismic exploration for Black Sea shelf.
- Money investment for big project (offshore rigs, midstream and downstream facilities etc.).
24/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Ukraine requires further studies in all hydrocarbon provinces and other areas to identify the oil and gas distribution in various geological structures and in the column therein. Specifically, it has to be studied the stratigraphic and tectonic controls, the host rock depth and composition, gas shale properties and fracturing, evaluation of gas resources and reserves, as well as economic viability to explore shale gas targets and their further development and commercial exploitation. All these activities are open for the foreign investors nowadays.
LOOK FORWARD
25/25
Canada - Ukraine Oil & Gas Opportunities Workshop, Kyiv, February 25-26, 2013
Thank you very much for your kind attention!