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Parry writes: "Behind the geopolitics pitting Russia against the West - and the ethnic tensions tearing Ukraine east and west - another backdrop for understanding this deepening conflict is the big-money competition for Ukraine's oil and natural gas."

The U.S. wants to assist the Ukraine in developing its shale gas reserves. (photo: Kyiv Post)
The U.S. wants to assist the Ukraine in developing its shale gas reserves. (photo: Kyiv Post)


Beneath the Ukraine Crisis: Shale Gas

By Nat Parry, Consortium News

25 April 14

 

he crisis gripping Ukraine has plunged transatlantic relations to their lowest point since the Cold War and threatens to send Ukraine into an armed conflict with potentially dire consequences for the country and the wider region.

Moscow’s alleged meddling in eastern Ukraine and its earlier annexation of Crimea spurred worldwide rebukes and much international commentary regarding the growing East-West divide. But one aspect that we have heard less about is the corporate struggle for Ukraine’s oil and natural gas. By some accounts, it is this struggle that is as much to blame for the current crisis as any geopolitical tug-of-war between East and West.

Ukraine has Europe’s third-largest shale gas reserves at 42 trillion cubic feet, according to the U.S. Energy Information Administration. While for years U.S. oil companies have been pressing for shale gas development in countries such as Britain, Poland, France and Bulgaria only to be rebuffed by significant opposition from citizens and local legislators concerned about the environmental impacts of shale gas extraction – including earthquakes and groundwater contamination caused by hydraulic fracturing or “fracking” – there has been considerably less opposition in Ukraine, a country that has been embroiled in numerous gas disputes with the Russian Federation in recent years.

Russia’s state-owned Gazprom, controlling nearly one-fifth of the world’s gas reserves, supplies more than half of Ukraine’s gas annually, and about 30 percent of Europe’s. It has often used this as political and economic leverage over Kiev and Brussels, cutting gas supplies repeatedly over the past decade (in the winters of 2005-2006, 2007-2008, and again in 2008-2009), leading to energy shortages not only in Ukraine, but Western European countries as well. This leverage, however, came under challenge in 2013 as Ukraine took steps towards breaking its dependence on Russian gas.

On Nov. 5, 2013 (just a few weeks before the Maidan demonstrations began in Kiev), Chevron signed a 50-year agreement with the Ukrainian government to develop oil and gas in western Ukraine. According to the New York Times, “The government said that Chevron would spend $350 million on the exploratory phase of the project and that the total investment could reach $10 billion.”

In announcing the deal, President Viktor Yanukovych said that it “will let Ukraine satisfy its gas needs completely and, under the optimistic scenario, export energy resources by 2020.” Reuters characterized the deal as ”another step in a drive for more energy independence from Russia.”

The United States offered its diplomatic support, with Geoffrey Pyatt, the U.S. ambassador to Ukraine, saying, “I’m very determined to cooperate with the Ukrainian government in strengthening Ukraine’s energy independence.”

U.S. Assistant Secretary of State for Europe Victoria Nuland spoke at an international business conference sponsored by Chevron on Dec. 13, 2013, after just returning from Kiev where she handed out cookies and sandwiches to demonstrators on the Maidan. In her speech, she urged Ukraine to sign a new deal with the IMF which would “send a positive signal to private markets and would increase foreign direct investment that is so urgently needed in Ukraine.” This is important for putting Ukraine “on the path to strengthening the sort of stable and predictable business environment that investors require,” she said.

Although stability and predictability are not exactly the words that people would associate with Ukraine these days, Western energy companies have continued to maneuver for corporate rights over Ukraine’s shale gas deposits. Last fall, officials were in negotiations with an ExxonMobil-led consortium to explore for hydrocarbons off Ukraine’s western Black Sea coast.

On Nov. 27, the Ukrainian government signed another production-sharing agreement with a consortium of investors led by Italian energy company Eni to develop unconventional hydrocarbons in the Black Sea. “We have attracted investors which will within five to seven years maximum double Ukraine’s domestic gas production,” Yanukovych said following the agreement.

At the time of Yanukovych’s ouster in February, Chevron and the Ukrainian government had been negotiating an operating agreement for the shale development effort in western Ukraine, and Chevron spokesman Cameron Van Ast said that the negotiations would go forward despite Yanukovych fleeing the country. “We are continuing to finalize our joint operating agreement and the government continues to be supportive,” Van Ast said.

Royal Dutch Shell is also engaged in the country, having signed an agreement last year with the government of Yanukovych to explore a shale formation in eastern Ukraine. When it comes to Crimea, numerous oil companies including Chevron, Shell, ExxonMobil, Repsol and even Petrochina have shown interest in developing its offshore energy assets.

Believing that Crimea’s onshore and offshore fields will live up to expectations, these companies have greatly expanded their exploration of the Black Sea off the Crimean peninsula. Some analysts believe that one of Vladimir Putin’s motivations for annexing Crimea was to ensure that Gazprom will control Crimean offshore energy assets – in addition to ensuring the continued use of Crimea as host to Russia’s Black Sea Fleet.

It is clear that all of these oil and gas companies – backed by their governments, including those of the Russian Federation and the United States – are deeply embroiled in the Ukrainian crisis, with much invested and much at stake. But with their disproportionate influence over Ukraine’s future, it should be kept in mind that the number one responsibility of any corporation is to increase profit margins for its shareholders, not necessarily to promote the democracy or sovereignty of the countries they are operating in.

This is particularly the case for Chevron and Shell, both of which have been implicated in major human rights violations in Nigeria. Chevron has been accused of recruiting and supplying Nigerian military forces involved in massacres of environmental protesters in the oil-rich Niger Delta, and Shell has faced charges of complicity in torture and other human rights abuses against the Ogoni people of southern Nigeria.

With this in mind, the Ukrainian people – whether in the east of the country or the west – might want to rethink what is meant by “energy independence,” and whether the future they seek can truly be met by placing their hopes in the benevolence of foreign oil and gas companies.

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+7 # zach 2014-04-25 12:38
I am sorry, but you know nothing whereof you write. Ukraine has been bilking foreign investors for 20 years, garnering huge bribes (fees) (liberally paid by the big, and small, oil & gas companies). Once a company had what it thought was a viable oil or gas development project in hand, the Ukrainian government threw the investor out, and started the whole bilking process all over again.
Every major E&P company in the world has been there, has the reserve maps and has little or no appetite to return. The present bunch of crooks is no better than any preceding bunch. They have just found a new sucker, us, to make them the darlings of the "free press" and world.
If Putin wants into that mess, let it sink him too. And, it will.
Yuck.
 
 
+12 # Working Class 2014-04-25 14:08
Zach - not challenging your point, but curious about what you base it on. Is there a reference to which you might direct an interested read? Thanks.
 
 
+21 # Anonymot 2014-04-25 15:04
Zach, yes, but... OIL & gas are a significant part of why the State Dept. spent 5 Billion bucks under Hillary to set up the "regime change" as admitted by her neocon helper Victoria Nuland. When we own the government, the equilibrium changes dramatically. Anyway, that's what the boneheads in the CIA, State, and the oil companies figure. But stupidity reigns.

If you're saying, "What does he know?" you'd better look up Iraq contracts oil china or click on this: http://www.industryweek.com/global-economy/china-signs-3-billion-oil-deal-iraq

We blew hundreds of thousands of lives & a trillion or so dollars because CIA's implant, Saddam Hussein, went sour on them and assigned oil exploration to Russia, China, & France (with tons of baksheesh of course) and the US/CIA felt shorted. So after their short-sighted war of unbelievable stupidity what's been gained? What has their new choice to lead Iraq done?

China is far and away the biggest exploration rights holder in Iraq in 2014. Exxon, way down the quantitative list, is #2 and every other oil company picked up peanuts. (Chevron has done okay by selling the rights they gained in Kirkuk to, Yes, the Chinese for big bucks that might be called our spoils of war - or corporate baksheesh.

I have serious doubts that behind their $2200 suits any of the CIA/STATE & Oil people there's a brain that would register over 60 IQ. Most of their gas comes out of body openings although they get lotsa oil on their palms.
 
 
+17 # PABLO DIABLO 2014-04-25 13:00
It's always about money.
 
 
+10 # Cassandra2012 2014-04-25 17:18
and oil. WWIII anyone?
 
 
+31 # dsepeczi 2014-04-25 13:36
I'm beginning to think that our country's own sovereignty is really just a myth. This country is beholden to Big Oil and the Military Industrial Complex. I don't believe it's a too distant future when our military will take it's marching orders from a corporate CEO instead of an elected president. Give it a hundred years or less and America will look much like the UK was depicted in "V for Vendetta". Behind closed doors, I think we're almost there now but it might take close to a hundred years before the powers that be are drunk enough in their power to end the theater and let everyone know who's really in charge.
 
 
+27 # bmiluski 2014-04-25 14:33
Oh dsepeczi honey the whole world is beholden to a very small group of men who control the worlds finances. They have no nationality, creed, race, etc. They are only onto themselves.
 
 
+8 # dsepeczi 2014-04-25 16:16
Quoting bmiluski:
Oh dsepeczi honey the whole world is beholden to a very small group of men who control the worlds finances. They have no nationality, creed, race, etc. They are only onto themselves.


Very true !
 
 
+35 # lorenbliss 2014-04-25 15:03
"...close to a hundred years..."? Dsepeczi, where have you been? The One Percent has already let us know "who's really in charge." That's the real purpose of Piketty's "Capital in the 21st Century"; that's the real purpose of academic studies that show the USian Ruling Class doesn't give a damn what the electorate wants. It's the fuck-you message in Bush v. Gore and the president's transformation from Obama the Orator to Barack the Betrayer. It's the message in the creation of the secret-police state with its total surveillance apparatus. It's the message drummed into us by the prison-industri al complex and prison-industri al public schools; the message repeated by conquer-the-wor ld foreign policy; by the brutal suppression of Occupy; by the Gestapo-like trampling of Boston's civil rights after the marathon bombing; by the scam of mandatory Obamacare made unaffordable by prohibitively expensive co-pays. It's the toxification of our foods by GMOs and the poisoning of our water by fracking; it's the Nazi-like retaliations that massacre an entire town to kill one suspected terrorist; it's the death-beyond-re surrection of the American Dream and the genocidal intent of austerity. Most of all, it's our eternal disempowerment by SCROTUS, the Robber Court that has us by the short hair, has ruled wealth is everything and votes are nothing, and has thereby condemned us all to inescapable slavery.
 
 
+6 # jsluka 2014-04-25 17:49
Extremely well said Lorenbliss! And I particularly liked the expression "from Obama the Orator to Barack the Betrayer."
 
 
+2 # lorenbliss 2014-04-26 20:31
Thank you.
 
 
0 # dsepeczi 2014-04-28 11:56
Quoting jsluka:
Extremely well said Lorenbliss! And I particularly liked the expression "from Obama the Orator to Barack the Betrayer."


I agree on all counts. The hundred years I was referring to was the day that the "powers that be" ended the theater by stating clearly and directly to the American public that there will be no elections, critics of the government will be openly run through a kangaroo court and put to death, etc. I know, as well as everyone else here knows, all the crap that the "elite" have already subjected us to. But, sadly, there's still a whole lot of our population that won't "get it" until the "powers that be" officially announce it instead of coming up with some kind of weak counterpoint that, amazingly, keeps close to half of our populace at bay. I think that will be delayed until the power structure is so complete that hardly anyone will dare speak out against it. Thus, the "100 years" comment.
 
 
+13 # tshette 2014-04-25 14:52
Since this whole "crisis" started I have been thinking that Putin was just flexing his photo op muscles. The oil and gas reserves
are obviously attractive to him. The US response which seemed to be based on the democratic myth for the Ukraine may well be more about American multinational corporations getting their foot in the door to "help" the Ukrainians - for a small fee - extract their oil and gas. When the US says it is "promoting democracy" you can be sure that there is an underlying reason that has more to do with money than it does with democracy. All you have to do is look at the last 20 years of US Foreign Policy to see that there is invariably an attempt to grab oil,gas, or land in the name of the "democracy" that America doesn't even practice any more. Russia and the US are both modern oligarchies.
 
 
+17 # Anonymot 2014-04-25 15:08
Everyone has forgotten the Club Of Rome study: THE LIMITS TO GROWTH. 1968, I think. Probably the most significant, intelligent, insightful book ever published on the planet's environment. They predicted flat out that in about 35/50 years (Now) there would be wars breaking out for lack of oil based energy supplies.
 
 
+10 # jsluka 2014-04-25 17:52
Yes, its obvious to anyone who thinks that infinite growth in a closed system is a recipe for certain disaster. But apparently few people "think" any more, or at least few think beyond their own immediate self-interest and short-term survival. The prognosis for the future of humankind is "terminal civilisation."
 
 
+7 # Activista 2014-04-26 01:45
The Limits to Growth is a 1972 book about the computer modeling of exponential economic and population growth with finite resource supplies.[1] Funded by the Volkswagen Foundation[2] and commissioned by the Club of Rome it was first presented at the St. Gallen Symposium. Its authors were Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens III. The book used the World3 model to simulate[3] the consequence of interactions between the Earth's and human systems."
en.wikipedia.org/wiki/The_Limits_to_Growth
excellent study - this book got me into computer simulation ... we have even better tools today (Big data analysis) -- but similar studies are censored (not supported) .. oligarchs rule not only in Russia ..
 
 
+3 # lorenbliss 2014-04-26 21:26
Essential reading as a companion to "The Limits to Growth" is Roberto Vacca's prescient work "The Coming Dark Age" (Doubleday: 1973).

Indeed it is arguable that -- just as the findings in "Limits" no doubt provided the motive for the seizure of wealth and cancellation of democracy mandated by the Powell Memo (for which Google) -- so did Vacca's analysis of the consequences of infrastructure collapse provide the One Percenters with an authoritative portrait of the "Hunger-Games" world they are now imposing on all the rest of us.

There are three lessons here.

One is that while ideas always have consequences, they are often not the desired consequences. ("Limits" and "Dark Age" were touted as calls for "progressive" action, but only the One Percent made effective use of them.)

The second lesson is that hope without the power to enact change is self-deception.

Lesson three is that – precisely as proven by the perversion of the ideas in question – democracy under capitalism is always a Big Lie. Without economic democracy, all other forms of democracy are meaningless.
 
 
+1 # Activista 2014-04-28 04:28
and more on
orenbliss.typepad.com
would also recommend Vaclav Havel's Power of Powerless -
http://en.wikipedia.org/wiki/The_Power_of_the_Powerless
 
 
+3 # Tigre1 2014-04-25 16:14
Hobson's choice. Or the punchline to the Zen story..."And the strawberry was sweet..."
 
 
+10 # jsluka 2014-04-25 17:54
Buddha told a parable in a sutra:

A man traveling across a field encountered a tiger. He fled, the tiger after him. Coming to a precipice, he caught hold of the root of a wild vine and swung himself down over the edge. The tiger sniffed at him from above. Trembling, the man looked down to where, far below, another tiger was waiting to eat him. Only the vine sustained him.

Two mice, one white and one black, little by little started to gnaw away the vine. The man saw a luscious strawberry near him. Grasping the vine with one hand, he plucked the strawberry with the other. How sweet it tasted!
 
 
+3 # Edwina 2014-04-27 09:52
Another article has pointed out that our sanctions on Russia are "mutually destructive", since Russia has no choice but to turn east to China. This article may help to explain why the US would do something that was not in its political interest: it is in the interest of multi-national corporations, only nominally attached to a nation.
 

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