He’s looking for a partner for a huge Black Sea hydrocarbon exploration project.
Ukraine is on the radar screen of energy investors more than ever before, after finally opening up its doors to the world’s largest energy companies this year. Kiev hopes the majors’ financial muscle and know-how will unlock potentially large yet untapped shale and offshore gas reserves.
The hope is for a big boost in domestic production that would wean an energy-intensive economy off increasingly costly Russian natural gas imports.
After inking a landmark production-sharing agreement this year with Royal Dutch Shell involving potential investment of up to $10bn in unconventional exploration and production in eastern Ukraine, Kiev is now moving towards signing of PSA agreements with two other energy majors that were chosen last year in tenders for groundbreaking exploration projects.
US-based Chevron stands to sign a shale gas exploration PSA agreement to drill in western Ukraine. An ExxonMobil-led consortium that also includes Shell is expected this year to finalise a PSA to explore offshore on the western part of Ukraine’s Black Sea coast.
What other opportunities are there?
As a stakeholder along with other investors in the Vanco Prykerchenska project, Akhmetov’s DTEK holds the keys to exploring a vast, 13,000 square kilometres offshore field off the nation’s eastern Black Sea coast.
And DTEK says it wants an international energy major to join as a partner for this costly yet potentially profitable deep-water exploration project.
Speaking with FT on the sidelines of the 4th annual Ukraine Energy Forum organised by Adam Smith Conferences, Maxim Timchenko, CEO and chairman of DTEK, said:
“My personal opinion is that we can only move forward on such a huge national project capable of changing the whole landscape of Ukraine’s gas sector with the participation of international oil and gas companies. This is my position. We are in the process, holding conversations. But this is something we need to discuss with other shareholders.”
Refusing to reveal what stake DTEK currently holds in the project by explaining that he was restricted from discussing the issue, Timchenko said: “For now we are still in a legal process and hope that it can be finished this year, allowing exploration to begin next year.”
He added: “For the first exploration period, a three-year period, we need to do 3D seismic studies and drill two wells. Our cost estimation for this alone is about $380m.”
But who are DTEK’s partners in the Vanco project? And will they back plans to lure in energy majors? Well, it’s all a bit of a mystery for now. A person close to the company suggests that other influential Ukrainian and Russian businessmen were in on the project in prior years.
DTEK is understood to hold at least a 25 per cent stake in the project, but the person close to the company says it is in talks to buyout some of the other partners with the aim of consolidating a majority stake. The plan is to later bring an international energy major in as a partner.
The Vanco Prykerchenska project traces its roots to a 2006 government gas and oil exploration tender won by US-based Vanco Energy. Later, the American company and its financial backers – the Rothschild family investment group JMR – gradually reduced their stakes in the project.
Akhmetov’s DTEK entered, as did two other companies. One is Shadowlight Investments, a private investment company owned by Russian businessman Evgeniy Novitskiy, who is also a director of Sistema, one of Russia’s largest publicly-traded companies.The other is little-known Integrum Technologies.
A person close to the project says that, as a result, Russian interests bought out Houston-based Vanco Energy, which reduced its initial majority stake in the project to 25 per cent.
The changes in beneficial ownership prompted Kiev’s past government, headed then by the now jailed Yulia Tymoshenko, to freeze the project in 2008 on concerns that it had fallen under control of Russian interests.
Tymoshenko’s action triggered an arbitration dispute that was only settled through a peace agreement late last year, the details of which were not disclosed. So, the current shareownership structure is not known, except for DTEK holding its 25-per-cent-plus stake.
The person close to the project said “talks are now underway” with the largest of western energy companies, adding that the deep-water exploration project “requires huge financial investments, technical expertise and state-of-the art equipment.”
The person added: “It would be logical if parties involved would be interested in some highly-experienced international player taking part. Considering the tensions between Ukraine and Russia, it would be only natural to choose a western partner, the likes of ExxonMobil, Chevron, Shell and others. Preliminary exploration will itself cost hundreds of millions of dollars. Potentially billions of dollars could be invested should commercially viable reserves be found. Naturally there are few companies in the world today who would be willing to spend such money in Ukraine. The geology has huge potential.”
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