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Overview of the Ukrainian

Oil & Gas and Shale Gas
Market Opportunities

by Lyubomyr Goncharuk
Adviser to the
Minister of Ecology and Natural Resources of Ukraine

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
 2/25

CONTENTS

1. Reserves & Resources

2. Production & Consumption
3. Opportunities

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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1. Reserves & Resources

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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Canada - Ukraine Four oil and gas provinces are recognized

Oil & Gas Opportunities in the country, including 11 oil-gas
Workshop, Kyiv basins and 35 prospective areas.
February 25-26, 2013
Hydrocarbon deposits are being
exploited for oil, gas, and condensate in
the following regions:
Oil & Gas 1/2
A the Eastern Region (Dniprovsko-
Donetska Depression and northwestern
Crystalline basement slopes

portion of Donbas);
Vo
Volyno-
Podilska Dn
r on
ez
hs A
Plate
ip ro
vs
ko
-D
on
ka
B the Western Region (Volyno-
B Lvivskiy
Kyiv
et s
k aD
ep
r es
si o
An tic lin e
Podilska Plate, Fore-Carpathians,
Trough n

Folded Carpathians, and Trans-

Fo
e- r
Ca
Fo ar p

rp
C
l d at

at
ed h i

Donbas

Carpathians);
hi
an

Tr
an

Tr

an
s

s UKRAINIAN SHIELD
ou

ca
rp
gh

at
h i an
s

C the Southern Region

200 km Fore-Crimean
Depression
(Prychornomorya, Crimea, and the
Fore-
Dobrugean C
Azov Sea
exclusive marine economic zone of the
Trough Scythian

Black Sea
Plate

un
t ai n
Mo r i m ea
Black Sea and Azov Sea offshore).
C
 5/25

Canada - Ukraine In 2011, production amounted to 2.4 million

Oil & Gas Opportunities tons of oil, 0.9 million tons of condensate,
Workshop, Kyiv
February 25-26, 2013
and 20.6 billion cubic meters of natural gas.

The State Inventory includes 187 oil deposits

Oil & Gas 2/2 (121 in production), 202 condensate
deposits (142 in production), and 380 natural
Crystalline basement slopes
gas deposits (224 in production).
Vo
r on
Volyno- ez
Podilska Dn hs
ip ro ka
Plate vs
ko
-D
on
et s

Lvivskiy
Kyiv k aD
ep
r es
An tic lin e

Trough
si o
n
High Proven and probable reserves are
Fo
e- r

Medium
Ca

estimated to:
Fo ar p

rp
C
l d at

at
ed h i

Donbas
hi
an

Tr
an

Tr

an
s

s UKRAINIAN SHIELD
ou

ca
rp
gh

at

133 million tons of oil

h i an
s

200 km Fore-Crimean
Depression
66 million tons of condensate
Azov Sea
1 trillion cubic meters of natural gas
Fore-
Dobrugean
Trough Low Scythian
Plate
t ai n
un
Black Sea Mo r i m ea
C
 6/25

This is potentially an important non-

Canada - Ukraine conventional additional hydrocarbon
Oil & Gas Opportunities
Workshop, Kyiv
resource confined to coal deposits in the
February 25-26, 2013 Donetskiy (A) and Lvivsko-Volynskiy (B)
coal basins.
The State Inventory comprises 200
Coalbed Methane deposits, of which 99 are in production.
Proven and probable reserves of methane
Crystalline basement slopes are estimated at 343 billion cubic meters.
Vo
Volyno-
Podilska
Plate
Dn
ip ro
r on
ez
hs
ka
In 2011, production totaled to 760 million
B vs
ko
-D
on
et s cubic meters of methane.
Lvivskiy
Kyiv k aD
ep
r es
An tic lin e

si o
Trough n
Fo

A
e- r
Ca
Fo ar p

rp
C
l d at

at
ed h i

Donbas
hi
an

Tr
an

Tr

an
s

s UKRAINIAN SHIELD
ou

ca
rp
gh

at
h i an
s

200 km Fore-Crimean
Depression

Azov Sea
Fore-
Dobrugean
Trough Scythian
Plate
t ai n
un
Black Sea Mo r i m ea
C
 7/25

Non-conventional shale gas resources are not recorded

yet in the State Inventory being preliminary estimated to
Canada - Ukraine
Oil & Gas Opportunities
some trillions of cubic meters.
Workshop, Kyiv Up to recent no research and practical exploration were
February 25-26, 2013
conducted in Ukraine.
Nevertheless, reconnaissance studies commenced last
Shale Gas years in Donetskiy (A) and Lvivsko-Volynskiy (B) coal
basins as well as Dniprovsko-Donetska (C) and
Prychornomorska (D) depressions and Fore-Carpathian
Crystalline basement slopes

(E) and Fore-Dobruja (F) troughs (fold belts).

Vo
r on
Volyno- ez
Podilska Dn hs
Plate

B
ip ro
vs
ko
ka
In 2012, the shale gas field tender has
-D
on
et s C
Lvivskiy
Trough
Kyiv k aD
ep
r es
si o
n
An tic lin e
been organized for two sites located in the
areas A and B. The permits for 50 years
Fo
e- r
Ca
Fo ar p

rp
C
l d at

at
ed h i

Donbas

of exploration and production granted to

hi

A
an

Tr
an

Tr

an
s

s UKRAINIAN SHIELD
ou

ca
rp
E
gh

Shell (A, Yuzivska field, 7886 km2) and

at
h i an
s

200 km Fore-Crimean
Depression
D Chevron (B, Oleska field, 6324 km2),
Azov Sea
depth 10 km each. The total investments
F
Fore-
Dobrugean
Trough Scythian
Plate
required under PSA conditions are
t ai n
Black Sea
un
Mo r i m ea
C estimated to $3.7 bln. in Yuzivska field
and $3.1 bln. in Oleska field.
 8/25

The State Inventory contains more than

Canada - Ukraine 900 deposits with proven and probable
Oil & Gas Opportunities
Workshop, Kyiv
reserves, located in Donetskiy (A) and
February 25-26, 2013 Lvivsko-Volynskiy (B) coal basins, of
which 400 are being exploited
underground.
Coal
Ukraines proven and probable coal
reserves are estimated at 53 billion tons.
Crystalline basement slopes

In 2011, production totaled to 69 Mt.

Vo
r on
Volyno- ez
Podilska Dn hs
ip ro ka
Plate

B vs
ko
-D
on
et s

Lvivskiy
Kyiv k aD
ep
r es
An tic lin e

si o
Trough n
Fo
e- r
Ca
Fo ar p

rp
C
l d at

at
ed h i

Donbas
hi

A
an

Tr
an

Tr

an
s

s UKRAINIAN SHIELD
ou

ca
rp
gh

at
h i an
s

200 km Fore-Crimean
Depression

Azov Sea
Fore-
Dobrugean
Trough Scythian
Plate
t ai n
un
Black Sea Mo r i m ea
C
 9/25

2. Production & Consumption

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
 10/25
Hard Fuels
(source: www.ukrstat.gov.ua)

64 700
62 559 544 639
61,7
61,8 600 2003-2011
60 58,9 449 500
60,4 59,5

Coal, mln. t

Peat, th.t
59,8 59,4 430
58 462 400
395
56 358 300
55,0
54 55,0 200
52 100
50 0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
Liquid Fuels
Coal, mln. t Peat, th.t (source: www.ukrstat.gov.ua)

3,5 1,4
1,3 3,1 3,2
Ukraine 3 2,8
3,0 1,2
3,3 3,3 2,9
2,6
1,2

Crude Oill, mln. t

1,2 2,4

Gas Condensate,
2,5 1,1 1,1 1,1 1,1 1
mineral 2
1,0
0,9 0,8

mln.t
1,5 0,6
figures. 1 0,4

Fuels 0,5

0
0,2

0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years
Gaseous Fuels
(source: www.ukrstat.gov.ua) Crude Oil, mln. t Gas Condensate, mln.t

21 1200
20,6
20,7
20,5 962 950
880 1000
Natural Gas, bln.m3

832 867

Oil-Related Gas,
20 745 20,2 744
20,1 19,8 800
19,9 721

mln.m3
19,5 19,6
19
658
19,2
600
Canada - Ukraine
18,5 18,6 400
Oil & Gas
200
18
Opportunities
17,5 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 Workshop, Kyiv
Years
February 25-26,
Natural Gas, bln. m3 Oil-Related Gas, mln.m3
2013
 11/25

200 600

180
500
160 Ukraine GDP and
Government Revenue

GDP, USD billion

140
400

Government

UAH billion
(source:

Revenue,
120
www.economywatch.com)
100 300

80
200
60

40 GDP
100
20 Government Revenue

0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Years

GDP, Revenue
Ukraine
mineral
growing
trends. Coal
Growth & Peat
Breaks
flat-varying

Oil-related Gas

descending
Crude Oil
Canada - Ukraine Natural Gas
Oil & Gas World Crisis Gas Condensate
Opportunities
Workshop, Kyiv 2004 2006 2008 2010 2012
February 25-26,
2013
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2010 Total - $51.4 bln

28%
iron ores
iron ore concentrates
iron casts
oil & products
52% fertilizers
non-organic chemicals
5%
non-minerals
4%
7%
2% 2%
Ukraine
mineral
sector export 2011 Total - $68.4 bln

27%

iron ores
iron ore concentrates
iron casts
oil & products
49%
fertilizers
6% non-organic chemicals
Canada - Ukraine non-minerals
4%
Oil & Gas
Opportunities 3%
8%
3%
Workshop, Kyiv
February 25-26,
Source: www.ukrstat.gov.ua
2013
 13/25

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

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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Ukraine: gas production

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.

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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Ukraine: gas transportation and storage infrastructure

High pressure pipelines - 23,600 miles
Volume of natural underground gas storages 1.12 Tcf

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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3. Opportunities

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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National Joint-Stock Company Nadra Ukrayny:

the Hydrocarbon Vehicle of the State Geological and
Subsurface Survey of Ukraine
Cabinet of Ministers
of Ukraine

State Geological and Subsurface Survey of Ukraine

NADRA UKRAYNY NJSC

Geological exploration; Other geological
License coordination; organizations
Cooperation with IOCs;
Oil and gas production.

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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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 Worlds Leading companies engaged in offshore seismic

exploration for their activity in Ukrainian sector of Black Sea (PGS, SGVeritas).

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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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.

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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Option 1: Production Sharing Agreement

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

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.
Canada - Ukraine Oil & Gas Opportunities Workshop,
Kyiv, February 25-26, 2013
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The PSA is
signed at
the World
Economic
Forum in
Davos on
Jan 24,
2013

Not granted in 2012,

moved to next round
of 2013

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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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.
Canada - Ukraine Oil & Gas Opportunities Workshop,
Kyiv, February 25-26, 2013
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Option 3:
Investments to NADRAs 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.).
Canada - Ukraine Oil & Gas Opportunities Workshop,
Kyiv, February 25-26, 2013
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LOOK FORWARD
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.

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013
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Thank you very much

for your kind attention!

Canada - Ukraine Oil & Gas Opportunities Workshop,

Kyiv, February 25-26, 2013