Low Energy Prices And Conflict Drive Shell Out Of Ukrainian Shale

Submitted by Andy Tully via OilPrice.com,
Royal Dutch Shell has been considering ending its partnership with a Ukrainian energy company in a shale gas exploration venture in eastern Ukraine because of the fighting in the region and prospect of little profit from the project.
In fact, at least two news reports say Shell already has notified Ukraine that it’s leaving in a formal ‘notice of withdrawal.’
The decision by the Anglo-Dutch oil major is more bad news for Ukraine, which had hoped that producing its own gas would make it less reliant on energy from its antagonistic neighbor, Russia, and potentially infuse the country’s distressed economy with much needed foreign investment.
As for Shell itself, sources identified by the Financial Times only as ‘insiders’ said the company had concluded that the project wasn’t worth the effort because of the armed conflict and the precipitous drop in energy prices over the past year, which have made the extraction of oil and gas less cost-effective given the expense needed to ensure efficient output from underground shale formations.
The Kyiv Post quoted a Shell spokesman as saying in an e-mail that the fighting between Ukrainian government forces and separatists supported by Russia amounted to ‘circumstances beyond Shell’s control.’ As a result, the spokesman said, the company has ‘been prevented from performing its commitments under [the] Yuzivska production sharing agreement,’ or PSA.

This post was published at Zero Hedge on 06/14/2015.