Italian energy giant Eni has entered a project to produce shale gas in the Lviv region of western Ukraine amid Kiev’s attempts to find alternatives to Russian natural gas, the company said on Friday.
Eni has signed an agreement with Ukraine’s state-owned Nadra Ukrayny and Cadogan Petroleum, an independent oil and gas producer with onshore gas assets in Ukraine, to buy a 50.01 percent stake in Westgasinvest, which holds rights to nine shale gas license areas in the Lviv Basin, totaling nearly 3,800 square kilometers.
“The Lviv Basin is considered to be one of the best prospects in Europe for the exploration of unconventional gas, being also an extension of the Lublin Basin in Poland, which has already attracted substantial interest from the hydrocarbon industry,” Eni said in a statement.
Ukraine is pinning great hopes on shale gas production with geological data suggesting that Ukraine boasts Europe’s largest shale gas reserves, and is likely to produce from 7 to 10 billion cubic meters in five to seven years.
Eni has been present in Ukraine since 2011 in the Zagoryanska and Pokroskoe licenses located in the Dniepr-Donetz Basin.
Ukraine has long been seeking to alter the terms of the 2009 gas deal it signed with Russia. The deal ties the price of gas to oil prices, which have risen strongly since 2009, increasing Ukraine’s gas bill.
Ukraine will have to pay $416 per cubic meter of Russian gas in 2012, and is insisting the price and contracted volume of its gas imports should be reduced.