Ukraine Gas Production Has Potential to Attract $10 Billion Annual Investment

February 2012, Vol. 239 No. 2

Ukrainian gas production has the potential to more than triple to 70 billion cubic meters per annum (Bcma) by 2035 but would require gas sector investment to increase tenfold to some $10 billion per year, according to a new IHS CERA special report.

Improvements to the country's investment climate are essential to achieving these potential increases in production, the report says.

“Ukraine's ability to begin to achieve its potential will require implementing an attractive investment climate," said David Hobbs, IHS chief energy strategist. "This, in turn, will allow the application of the essential modern technologies - for seismic evaluation, drilling, completion, well stimulation and production management.”

 Ukrainian gas production has the potential to increase to 70 Bcma by 2035 - more than triple current production - if increased investment can be attracted, according the report's indicative gas production profile. This includes resources from new discoveries of conventional gas onshore and offshore, and considerable new resources from tight gas sands and unconventional shale gas and coal bed methane.

Although Ukrainian legislation affecting the gas sector has seen positive changes in the past 18 months, the overall regulatory environment for investors remains complex and extremely challenging, the report found. It suggests the government focus on developing a midstream segment - transportation and storage - that could remain as a regulated monopoly for the time being (although storage could be spun off as well). It also suggests changes to permitting including greater duration and acreage for license awards, a strong preference for issuing combined special permits for E&P, and in general more streamlined permitting procedures.