Borysfen Intel

"Borysfen Intel" Comments

February 10, 2013

Bohdan Sokolovskyi

Ukraine’s signing the agreement on shale gas production has become one of the main events in our life at the beginning of 2013.  It caused lots of comments and publications in mass media, round tables and interviews of politicians, businessmen, specialists in production of hydrocarbons. No doubt, everybody has his/her own opinion about Ukraine’s cooperation with Shell company, about the principles of the cooperation and dividends of all the interested in shale gas production sides. The main hopes are that “slate” will help Ukraine become a really independent state in economic aspect, at least in this important for the country issue. “Borysfen Intel’s” experts have been constantly approached by those interested in gas theme, for comments. For example, at the Forum site there are comments of the Manager of International Programs B.I. Sokolovskyi about the decrease of volumes of Russian gas which has been bought since signing the agreement on shale gas production with Shell: 

This circumstance alone, the very fact of signing such an agreement, will in any case play a positive role for the energy independence of the state”, said the expert of energy issues Bohdan Sokolovskyi. He pointed out that it is not so much the fact of production that matters, but the evidence of such a possibility alone, will be a serious argument in negotiations with Russia.

The proof of the possibility of commercial production will be a serious argument "for" in negotiations with Russia on a new contract for the purchase of gas after 2019. It is during this time, before 2019, the company Shell has to do all that is necessary to bring shale gas to the commercial production. As the international experience shows, all this will take 5-7 years. So, there is no time to linger" said Sokolowskyi.

Head of the Energy Programs of “Borysfen Intel” Analytical Center Serhiy Dyachenko is sure that the agreement with Shell will allow Ukraine to cut several times the volumes of purchases of Russian gas:

This is not just a matter of energy independence; it is the matter of the independence of Ukraine in general. This results from all that is being done in the gas sector with supplies of Russian gas to Ukraine. Therefore, shale gas is now an economic and political project. As shows the experience of the U.S., these are projects, the volumes of which can take an important step toward energy independence. If the project is successfully realized, it will allow to reduce several times the volumes of Russian gas which we purchase”, — said Dyachenko.
Remind that, on the 24th of January 2013, an agreement was signed between Shell and the company "Nadra Yuzovska" (Yuzovska mineral wealth) on the distribution of the production of shale gas in Yuzovska Area in Kharkiv and Donetsk regions.

No less interesting is also the problem of the closure of coal mines of Ukraine. "Mines — for privatization, miners — to die" — was the title of an article by Nana Chornaya in the UNIAN, in which the author tries to compare the process of closing mines in Ukraine with the same processes in other countries. The article reads that Ukraine cannot maintain the required enormous expanses of assets because of its poor budget. The way out is seen in privatization or concession or lease of coal enterprises. This is supposedly the only way to save them. But is it? And who will be managing such a "business enclave"? An energy expert Sergiy Dyachenko (“Borysfen Intel” Center), approached by the author of the publication for comments, “believes that the privatization of the mines is an important part of the restructuring of the coal industry. Today it is in a very difficult situation: up to 80% of the state mines are unprofitable. Each year, the industry receives billions in subsidies from the state budget. In 2013, 7.8 billion UAH will be given to support it.

... Among the reasons for this situation is a high degree of depreciation of fixed assets, adverse conditions of the occurrence of coal and its low quality, so it is gradually being replaced by imports. The non-transparent pricing system in the energy industry, communal sphere, particularly in the electricity sector, adds to the problem. Policy of cross-subsidization and holding back prices also affects the domestic coal industry. Successful privatization aiming at attracting strategic investors could help improve the situation. But the other side of industry restructuring may become a mass closure of mines. Studies indicate that such a fate could befall up to 40% of coal mines”,
— said the expert.

In his attempt to be as objective, as possible, the author tries to look at the problem through the eyes of those directly related to the future of the mines, i.e. through the eyes of miners. Their future is seen in dark colors. And who can facilitate their fate? On whom does their future, future of their families depend in this hard period of time? "The concession and privatization are an international practice of economic activity. Especially often these levers are used in time of crisis. However, these processes must be based on a civilized principle and be transparent, with a clear run compensation program for staff who undergo "innovations." To Ukraine, being a developing country, this seems to come not too soon. By then, most likely, there will be no enterprises available for sale, nor there specialists and facilities left. They will either leave the country or ... ", — the author of the article finishes it in mid-sentence, offering the reader to think about our modern life.
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