Prospects of a new shale gas deal in Ukraine hit a setback on Tuesday when a local council voted against an initial draft production-sharing agreement with U.S. energy major Chevron, an official said.
The official, who did not wish to be named, told Reuters that deputies in Ivano-Frankivsk region, in the west of the country, had sent the draft back to the government, pressing for guarantees which would address their concerns over the exploration plans.
Chevron wants to tie up a deal to explore the Olesska shale field in western Ukraine. Royal Dutch Shell has already signed a $10 billion deal for shale exploration and extraction at the Yuzivska field in the east of the ex-Soviet republic.
According to the council's website, deputies had concerns over the ecological consequences of shale exploration in a mountainous forest region known for inland tourist resorts.
The "fracking" process, in which water and chemicals are used to break up rock, sandstone and shale deposits to release gas, has sparked opposition from environmentalists who fear it can pollute underground waterways.
But the Kiev government sees shale gas development as a key to easing its dependence on costly gas imports from Russia which weigh heavily on its economy.
Ukrainian Fuel Minister Eduard Stavytsky was quoted by UNIAN news agency as saying that Chevron has proposed investing $350 million in initial tests to ascertain the commercial viability of gas deposits at the Olesska field, with a $3 billion investment envisaged for the first stage of extraction.
Stavytsky told Reuters by telephone: "We will consider the proposals (from the council) and in mid-September there will be another vote.
"There is nothing dramatic in what has happened. This is the normal working process," he said.
Assuming that Ivan-Frankivsk council finally supports the deal, it will still require the approval of a second council in Lviv region for the deal to be concluded.
