President of Ukraine Vladimir Zelensky invited US companies to participate in the development of the Black Sea shelf and in projects for the extraction of Ukrainian natural gas and oil. The head of the Ukrainian state made such a proposal after a meeting with US Secretary of State Mike Pompeo.
“We look forward to the participation of American companies in tenders for the development of sections of the Black Sea shelf,” the Ukrainian president emphasized.
Vladimir Zelensky also invited American business to participate in the development of the country's railway industry and asked Washington to abolish 25% duties on steel imports.
In turn, Mike Pompeo said that the United States hopes to develop economic ties with Ukraine.
- Vladimir Zelensky and Mike Pompeo
- © president.gov.ua
Need for growth
Vladimir Zelensky’s offer to American companies to participate in the production of Ukrainian hydrocarbons came on the second day after the news of the depletion of the country's most important gas fields. Ukrgasodobycha, a subsidiary of Naftogaz, said that the five largest deposits of Ukraine - Yablunovskoye, Efremovskoye, Melekhovskoye, Shebelinskoye and Zapadno-Krestischenskoye - were exhausted by 79-90%.
The company is trying to find new sources of gas. So, last year in Ukraine, three fields were discovered with proven reserves of 2.15 billion cubic meters. However, these volumes, given the amount of gas consumed by Ukraine, will last only a month.
According to Ukrtransgaz JSC, in 2019 gas production in Ukraine amounted to 20.7 billion cubic meters, decreasing by 1% compared to the previous year. At the same time, 26.4 billion cubic meters were sent to consumers of all categories. Another 3.4 billion cubic meters was spent on production costs. 13.1 billion cubic meters were pumped into underground storage facilities.
Ukraine imported 14.2 billion cubic meters of blue fuel last year, with the entire volume coming from EU countries. Kiev officially declares that it does not buy Russian gas, as it receives it by reverse with an extra charge from the countries of Eastern Europe.
Oil production in Ukraine remains at 1.6 million tons of oil per year.
At the same time, the Ukrainian leadership intends to achieve an increase in hydrocarbon production so that the amount of gas consumed and produced in the country coincides. Such goals were previously set by the government of Vladimir Groisman. It was assumed that in 2020 Ukraine should enter the production of 27 billion cubic meters per year. However, last year Groisman accused Naftogaz of failing this plan.
On September 2, 2019, the head of the Ministry of Energy and Environmental Protection of Ukraine Volodymyr Orzhel said that the strategy should be reviewed. Orgel also advocated for the growth of its own production of natural gas and said that he had discussed the necessary investments with his American colleagues.
Looking for investors
In December, President Zelensky introduced the decision of the National Security and Defense Council of Ukraine (NSDC) “On urgent measures to ensure energy security”. In particular, the president ordered the Cabinet of Ministers to submit to the Verkhovna Rada bills “on increasing the production of natural gas, oil, shale gas, gas (methane) from coal deposits” before April 1, 2020.
In January, the Ministry of Energy and Environment of Ukraine came up with proposals to stimulate hydrocarbon production. So, it was proposed to introduce a special tax for the use of gas production sites to prevent situations when owners do not develop fields.
- Gas pipeline in Ukraine
- Reuters
- © Gleb Garanich
The Ministry of Energy also advocates for the modernization of the “regulatory field”, amendments to the Ukrainian Code of Subsoil, laws of Ukraine “On Oil and Gas” and “On Production Sharing Agreements” to make the conditions for oil and gas production in Ukraine more transparent for foreign investors .
According to experts, the fact that Zelensky’s order to increase gas production in Ukraine was framed as an NSDC order is connected with the political position of the current Ukrainian leadership. Kiev does not recognize that it buys Russian gas, but at the same time seeks, through its own production, to get rid of “dependence” in gas supplies from the Russian Federation.
“This is a practically religious issue,” said Alexander Asafov in an interview with RT. “Now in Ukraine they are trying to attract Americans, to interest them in additional profit in order to increase gas production, but this does not look very realistic.”
Some foreign investors are already investing in hydrocarbon production in Ukraine. In December last year, the Polish company PGNiG and the Ukrainian ERU, one of the co-owners of which is American Dale Perry, entered into an agreement to develop a natural gas section near the Polish border.
Long-suffering "Dolphin"
In the coastal zone of Ukraine is a very large gas field "Dolphin". In April 2019, the Ukrainian state announced a competition among private investors for the development of the field.
In the unfolding struggle for gas, the American company Frontera Resources, the Ukrainian joint-stock company DC Ukrneftebureniye, which is associated with the oligarchs Igor Kolomoisky, Vitaliy Khomutynnik and Pavel Fuchs, and the US-registered company Trident Black Sea, former State Duma deputy Ilya Ponomaryova, participated in the unfolding struggle for gas. The last competition was won, but the Ukrainian government canceled its results.
At the same time, Vladimir Groysman complained that he was expecting investors of a different level, such as Shell and Exxon. The new competition, the new government of Ukraine promises to be held in March 2020. American companies Vladimir Zelensky also calls for participation in it.
The situation is complicated by the fact that Naftogaz considers 40% of the site to be its own and threatens potential investors with ships. The state oil and gas company itself is also preparing to participate in the competition together with a certain “large global partner”.
Political question
RT sources in Ukrainian political parties fear that the government of Vladimir Zelensky might transfer the country's bowels to foreign companies.
“The invitation of American companies is political. The president’s office, obviously, expects that the presence of American partners will allow Ukraine to strengthen its position in the Black Sea. Therefore, I won’t be surprised if the shelf will be given to the Americans practically for nothing, ”a source in the Batkivshchyna party said in an interview with RT.
A similar opinion is shared by the representative of the European Solidarity Party.
“Look at what Zelensky’s office is doing. They are preparing to sell land, state-owned enterprises and give development to the shelf of the Black Sea. Russian buyers will not be allowed to these assets, and all the most valuable will be sorted out by those who are supposed to. Nothing will remain in the ownership of state-owned companies. Even the Germans are interested in the railway, ”the deputy said in a conversation with RT.
Political analyst Alexander Asafov, in an interview with RT, called Zelensky’s statement about the invitation of American companies to extract gas or oil in Ukraine “another demonstration of a vassal oath”, noting that Zelensky did not address representatives of other countries with such a proposal.
“In principle, it’s not obvious to me why it is to invite Americans, except for politics. Ukrainian miners even have experience working on the shelf, ”said Alexander Frolov, deputy director general of the National Energy Institute, in a RT commentary.
However, Frolov expressed serious doubts that American investors would be seriously interested in Ukrainian gas or oil.
“In principle, American companies have not expressed their interest in working with traditional gas reserves,” Frolov said. “If it were interesting to anyone, American and any other companies would have come there long ago, at least French, at least Norwegian.”
According to Frolov, Ukraine will not receive serious investments.
“Zelensky said stupidity. No one will come there. Local production is falling. Investments are either stolen, or the deposits are so depleted that it is simply pointless to work on them, ”the expert summed up.