Transparency Needed For Ukraine To Cash In On Energy Bonanza

By Author: Viktor Tkachuk
Total Articles: 17
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According to BP, Ukraine has proven natural gas deposits of 0.98 trillion cubic metres - enough to make the country self-sufficient in gas for the next 20 years. Government estimates include a further 2 to 32 trillion cubic metres of shale gas close to the Polish border and up to 8 trillion cubic metres of coal bed methane gas in the Donbas basin, although these have yet to be commercially proven. Methane is so abundant that 75% of Ukraine's 200 coal mines are now classified as highly dangerous. In addition, there are new gas fields in Crimea and the potential for sizeable hydrocarbons on the Black Sea shelf.

Ukraine could achieve prosperity for its citizens and become a net exporter of energy to Europe. It must first qualify these reserves that are in close proximity to the West and for which there already exists a ready-built pipeline network with spare capacity, says People First CEO Viktor Tkachuk. These factors maybe explain why Ukraine's state gas company Naftohaz Ukrainy is being pursued so ardently by Gazprom.

The global cost of gas is declining due to cheap LNG imports and new technologies that enable ...
... shale gas to be exploited commercially. In comparison, Russian natural gas extraction and transportation costs are relatively high given the remoteness of its reserves and unfavourable terrain. Ukraine's gas reserves are close to lucrative EU markets.

In order to exploit its hydrocarbon assets, Ukraine must end the vicious circle of corruption, bureaucracy and geo-politics that has hampered the industry and deterred foreign investors.

A reliable, independent judiciary, combined with greater transparency, accountability and the rule of law, would foster a safe and predictable environment for foreign energy investors and dramatically improve our investment attractiveness, says Victor Tkachuk. These attributes, together with transparent and workable, production sharing agreements are desperately needed.

The government should renew the inclusion of ‘Stability Clauses' into contracts to safeguard foreign investments. These give investors the right to compensation in case of radically changed political and economic circumstances. Their exclusion is cited by as a major barrier to investment by leading energy companies.

Europe could have in Ukraine a potential Gulf state on its doorstep, says Viktor Tkachuk. It's time for European policy makers to reassess Ukraine's strategic value and to help safeguard democratic freedoms. Democracy is not just good for the people it is beneficial for business too.

Russia clearly has a strategy for Ukraine and its influence is growing. Yet Europe's future prosperity is more closely linked to Ukraine's democratic development than many policy makers currently think.