Next year Shell will start drilling first production well on Yuzovsky deposit

The Anglo-Dutch extractive company Shell plans to start drilling first production well on Yuzovsky block (Kharkov and Donetsk regions) in the first half of 2014, said Oleg Proskuryakov, the Minister of Ecology and Natural Resources of Ukraine during his trip to Kharkov region. According to him, now Shell’s experts determine the optimal location for the well so that the company does not end up with an empty hole. More precise date of drilling depends on the time needed for such evaluation.

According to the Minister, Shell will operate Yuzovsky deposit under a production sharing agreement with the Government of Ukraine. Environmental assessment of the agreement has already been done, but the Ministry is yet to examine the environmental project for the deposit development. “The project goes through public and state examination, if necessary – international examination. When environmental risks are minimized, the company will be allowed to start work. For now, it is only exploratory operations,” said Proskuryakov.

The Minister stressed that Shell is already engaged in exploration work in Kharkov region on a different project – a JV agreement with Ukrgasvydobuvannya state gas producer. “As part of this agreement, hydrofracturing is successfully being run on exploration well Belyaevskaya-400 in Pervomaisky region. Well location was visited by public environmentalists and representatives of the Ministry of Environment – there is no environmental threat there,” said Proskuryakov.

On January 24, 2013 Shell, Nadra Yuzovskaya and the Ukrainian government signed a production sharing agreement (PSA) for the exploration, development and production of hydrocarbons on Yuzovsky deposit. Size of the block is – 7,886 The initial stage of exploration involves obtaining seismic data and drilling of up to 15 wells. Before starting work, Shell will conduct a comprehensive assessment of the potential impacts on the ecology and social environment, as well as on health of the population, contracting for this task the “Environmental Resources Management” company.

The JV agreement was signed in 2006 and updated on September 1, 2011; it covers prospecting, exploration and production of hydrocarbons in the licensed plots (total area of about 1,300 square kilometers) in Kharkov region. Shell and Ukrgasvydobuvannya hold each 50% stake in the project. Under the agreement Shell is the project’s operator. In September 2013 the sides finished drilling the first exploration well in Pervomaisky district of Kharkov region, starting in December 2013 drilling works for the second well, Novo-Mechebilovskaya-100, located in Bliznyukovsky region near Novonadezhdinskoe village. Upon completion of the initial exploration phase, Shell investment in the joint venture could reach $200 million.

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