The Ivano-Frankivsk Oblast Council passed a resolution on August 20, which can make a far from best impression about Ukraine on the foreign companies that are waiting for signals on a favorable climate for investments in the production of nontraditional gas in Ukraine. The councilors refused to approve the production sharing agreement (PSA) for the extraction of hydrocarbons at the Olesko site between the state of Ukraine, Chevron Ukraine BV, and Nadra Oleska Ltd.
Yet the question still remains open. The Oblast Council Chairman, Vasyl Skrypnychuk, has been instructed to submit to the government the proposals of the council’s working that has made 148 critical remarks about the PSA. The councilors are ready to take up the matter again if necessary changes are made. In particular, Ivano-Frankivsk insists that an entity to be founded by the oblast’s territorial community should become a party to and a full-fledged participant in the project. In the councilors’ view, this entity will represent the interests of local communities, take a direct part in production sharing, and monitor the way the project is carried out. “The project will only be successful if a consensus is reached through a civilized compromise between all the participants in and parties to the agreement,” Skrypnychuk pointed out.
The central government tried to lobby the regional councilors for approving the PSA. Some members of the Ukrainian parliament were present at the session, and Eduard Stavytsky, Minister for Energy and Coal-Mining, delivered a passionate speech. He announced that the government had met the wishes of the territorial community and the agreement had now a clause that allows the oblast to retain 10 percent of the gas production profit. In the minister’s words, Chevron will invest 350 million dollars in the project at the first stage of prospecting and 3 billion dollars at the first sage of extraction. The oblast will see thousands of new jobs created, a comprehensive social security program, etc.
Stavytsky said it was a ground-breaking agreement for Ukraine, for it will “ensure the state’s independence in terms of energy and the economy.” The minister called the increased production of Ukrainian gas a top priority. But, in his words, “the century-old intensive extraction has largely exhausted traditional gas fields in Ukraine. So our main hope is nontraditional gas reserves, including those of shale gas.” “The Ukrainian government’s goal is to drastically boost our own production by attracting multibillion-worth investments in nontraditional gas extraction as well as to launch shale gas search projects in this country,” Stavytsky stressed.
On the eve of the oblast council session, Mykhailo Vyshyvaniuk, chairman of the Ivano-Frankivsk Oblast Administration, was also actively endorsing the idea of approving the PSA. He seemed to be trying to pressure the councilors into holding a roll call vote. “I will insist tomorrow that everybody vote by roll call. Then you will see who supports the sovereignty and independence of Ukraine and who works for Gazprom,” Vyshyvaniuk said in conclusion.
Yet his efforts were futile. Forty “for” votes out of the possible 114 is a convincing illustration of the opinion spectrum. Even the image of an enemy did not help. “I’ve been saying from the very beginning that the fiercest resistance to the solution of this problem will come from the Russian company Gazprom which will try to retain at any price its position on the Ukrainian market. It is seeking out various ways and people, cooking up horror stories, and is doing its utmost to have this agreement thwarted,” the governor said in earnest. “Are we the wisest?” he continued, speaking about the experience of the US and other countries that carried out a shale gas revolution. “Moreover, these countries have gone forward and we have an opportunity to learn their experience.”
On the voting day, Ivano-Frankivsk heard the “heavy artillery:” US Ambassador to Ukraine, Geoffrey Pyatt, granted an interview to Radio Liberty. “This is a safe technology when applied with the right regulatory and government oversight. That’s the lesson of the United States. The United States is becoming more energy independent as a result of the shale gas revolution. So, I think, it’s perfectly appropriate that there is a debate here in Ukraine,” he said. “I know that our American companies – I can’t speak for the non-American companies, but certainly, the American companies – will be eager to share with both national and local officials the lessons that they’ve learned.“ But, obviously, Ivano-Frankivsk did not heed the ambassador.
It looks like the PSA will also flop in Lviv. Iryna Sekh, MP (Svoboda faction), chair of the Parliamentary Committee for Ecological Policies, told the Ivano-Frankivsk Oblast Council session that “there was a sitting of the working group [in Lviv]. The sitting heard no positive arguments about approving this agreement.” She specified that 40 out of 116 Lviv oblast councilors belong to the Svoboda faction. “In this situation, the Svoboda faction is not going to approve this agreement,” Sekh said reassuringly.
What conclusions can be drawn from this fiasco of the Ukrainian government? Defending national interests on the “shale gas battlefield,” the latter does not care much about taking into account the interests of local communities. It is also surprising that the PSA was signed before being approved by regional councils. As a result, our government is now in dire straits – its efficiency has been called into question in its own country.
Yurii KOROLCHUK, expert in energy matters:
“I do not oppose developing new gas fields in Ukraine. If there is an opportunity to develop shale and sea shelf gas deposits, we should seize these opportunities. But the main obstacle in the case of shale gas is a still unclear environmental side of the matter. In the US, a special shale gas institute carried out years-long research into the polluting effect of gas extraction on water and concluded that there was no pollution currently, but what will happen in the future is still an unanswered question. In Ukraine, too, it is an open question. On the other hand, the bargaining between the local authorities and Chevron is also a problem. What is it all about? If the central government receives a big financial benefit from the extraction, why can Ivano-Frankivsk oblast not be entitled to, say, 50-60 million dollars as compensation for the likely environmental risks? So it seems to be the question of price. It seems to me that the councilors did not plan to make this decisions and the shale gas question is still to be finally discussed at the Ivano-Frankivsk Oblast Council. In my view, the councilors will reexamine this issue and give the go-ahead, but Chevron will have to agree to fund infrastructural facilities in that area.”
Ihor DEICHAKIVSKY, member, Ivano-Frankivsk Oblast Council, Svoboda faction:
“We have nothing against the extraction of shale gas, all the more so that the ecologists, who were present at the session, presented ample proof of this project’s safety. Nor do we have any complaints about Chevron. Moreover, nobody was going to thwart this idea only because the government was lobbying it. However, we utterly disliked the text of the agreement. It is inadmissible – in the 22nd year of independence – to lease out a territory for 50 years. So this agreement has encroached on the very sovereignty of our state. We are no 19th-century Papuans to be treated like a ‘banana republic,’ where a private company can buy all that it pleases. Nobody rejects the possibility of developing the riches of our earth – but not with an agreement like this. We’ll be waiting for our wishes to be met and a new project to be drawn up.”
Interviewed by Natalia BILOUSOVA, The Day; Volodymyr POLOVSKY, Ivano-Frankivsk
Chevron is waiting to see the government’s reaction
The Day requested Chevron’s Kyiv office to comment on the situation. In particular, we wanted to know what they think about the Ivano-Frankivsk Oblast Council’s decision – whether this course of events means the company’s departure from the Ukrainian market and what further actions they may take (to persuade the public of the necessity and safety of extracting shale gas or to persuade the councilors to discuss the draft agreement again). Although we asked three questions, the official answer signed by the company’s regional manager Peter Clark was succinct and more than eloquent: “Chevron is waiting and watching the way the Ukrainian government is addressing the problem touched upon by the Ivano-Frankivsk Oblast Council, which will allow us to speed up this strategic project.” So the company seems to have left the shale gas issue to the government’s discretion. Yet Chevron is not going to drop its plans in spite of many “buts.” The press service of another company, Shell, has also refused to make any comments on its rival’s situation.
By Natalia BILOUSOVA, The Day