Ukraine will increase its natural gas production by as much as 25% in the next three years in order to wean itself off costly Russian supplies and wriggle free of Moscow's influence, the Prime Minister said in an interview. On the eve of talks in Brussels Tuesday, he also accused European leaders of blocking Ukraine's efforts to integrate into the European Union over the jailing of an ex-prime minister.
The comments reflect the increasingly difficult balancing act for Ukraine's leadership as it attempts to steer the former Soviet Republic of some 46 million between its two powerful neighbors.
The Ukrainian President's attempts to integrate his country with the European Union have faltered in recent months amid accusations of authoritarian behavior and attempts by Moscow to cajole its neighbor to form tighter economic ties in return for cheaper natural gas supplies.
Ukraine consumes around 60 billion cubic meters of gas per year, around two-thirds of which is imported from Russia. Two new drilling rigs, one of which arrives on Ukraine's Black Sea shelf this month, will help boost production by three to five billion cubic meters by 2015. Natural Gas Expert Witnesses are expected to be on site.
He hailed recent agreements with Royal Dutch Shell RDSA and Chevron Corp. to explore two large shale natural gas fields as critical steps to increase the country's energy independence. He said shale gas could hold the key to eventually covering all of Ukraine's needs. Officials say they expect to start producing from five to 15 billion cubic meters of shale gas per year by 2020, depending on the results of exploration.
The U.S. Energy Information Administration estimates Ukraine has the third-largest shale gas reserves in Europe at 1.2 trillion cubic meters. Officials said more tenders are planned. Representatives of Exxon Mobil Corp., an unsuccessful bidder on one of the fields won by Shell and Chevron, will meet with the prime minister this week.
The exploitation of shale gas deposits could weaken the influence Russia attempts to exert on Ukraine's economy and politics. Analysts say Russia has used its control over natural gas supplies to its neighbor to try to enforce its political will. Russia has turned off supplies to Ukraine twice in recent years amid disputes over pricing and payment.
Ukraine has been trying for months to renegotiate a gas contract that will see it pay around $415 per thousand cubic meters this year, a price the Ukraine feels is unfair. But Russia has refused, demanding closer economic integration including joining a Moscow-led customs union. Many times the negotiations appeared complete, but every time some reasons were found to delay the matter on the Russian side.
The Ukranian president has so far rebuffed Russia's offers, instead taking steps to bring his country closer to the EU. But Europe has shelved a planned free-trade and political association deal over the jailing of the ex-Prime Minister, calling the prosecution politically motivated and demanding her release.
A Ukrainian court on Tuesday delayed the start of an appeal hearing on her conviction for abuse-of-office in connection with gas contracts signed with Russia when she was prime minister in 2009.
European leaders in recent weeks have intensified criticism of the president, whom they accuse of using the courts to sideline. The German Chancellor last week branded Ukraine a "dictatorship."
Several European leaders have threatened to boycott the European soccer championship, which Ukraine co-hosts with Poland next month, over the treatment of the ex-prime minister.
The current prime minister accused European leaders of using the case to slow down Ukraine's integration and called on them not to draw an "iron curtain" across Europe.
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