Shale work in Ukraine on hold, Shell says

CEO says operations can't continue in current environment.
By Daniel J. Graeber   |   Aug. 1, 2014 at 10:10 AM
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AMSTERDAM, Netherlands, Aug. 1 (UPI) -- Operations in shale acreage in eastern Ukraine can no longer continue as planned, the chief executive officer at Royal Dutch Shell said.

Shell released strong earnings for second quarter 2014. In a conference call to explain the report, CEO Ben van Beurden said some of the company's operations in Europe may be influenced by ongoing crises in Ukraine.

The European community is trying to diversify an energy sector influenced heavily by Russia. The European market gets about a quarter of its gas needs met by Russia, though most of that runs through the Soviet-era gas transit network in Ukraine.

Russia's role in conflict in eastern Ukraine prompted Western powers to issue harsh sanctions against the Kremlin. Van Beurden said his company wasn't as vulnerable to those sanctions as other companies, but said the sanctions pressure had changed the game in terms of an investment perspective.

In Ukraine itself, the CEO said the company's shale acreage in the east of the country was close to the wreckage of Malaysia Airlines Flight 17, which was shot down in mid-July.

"The operation we had on unconventional exploration [in the area] is on hold," he said Thursday. "We have declared force majeure as we cannot continue operations there."

Force majeure releases a company from contractual obligations because of circumstances beyond its control.

Shell in January 2013 signed a 50-year production sharing contract to explore shale natural gas reserves in Ukraine. Kiev estimated Shell is targeting an area said to contain about 4 trillion cubic feet of shale natural gas.

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