Shell mulls pulling out of Ukrainian shale gas project

Shell is considering exiting a major shale gas project in eastern Ukraine, a source said Thursday, almost a year after freezing exploration owing to fighting between government troops and pro-Russian rebels.

The Anglo-Dutch oil company signed a deal with the Ukrainian government in early 2013 to explore the Yuzivska field, an important agreement for Kiev as it seeks to reduce its dependence on Russian energy.

However Shell announced in July 2014 that it was prevented from working on the site, located in part in the rebel bastion of Donetsk in eastern Ukraine, due to "force majeur" -- forces outside its control, namely the proximity to the fighting.

"Due to the said events, project implementation conditions have been materially changed," a Shell spokeswoman told AFP on Thursday.

"Therefore, we have begun discussions with the Ukrainian government and our partner Nadra Yuzivska LLC on the way forward with the PSA, pursuant to its terms."

A source close to the matter confirmed that withdrawing from the project altogether was one of the options under consideration by the oil firm.

The Ukrainian government estimated in 2013 that the field could produce between 10 and 20 billion cubic metres of gas every year.

The Yuzivska field covers about 8,000 square kilometres across the regions of Donetsk and Kharkiv.

Ukraine is considered one of the most promising countries for the exploration of shale gas in Europe, alongside Poland and Romania.