Chevron Will Honor Fracking Contract with Ukraine

Chevron Will Honor Fracking Contract with Ukraine

Chevron will not break their fracking contract with Ukraine even though there is a new government in Kyiv. The contract allows Chevron to explore for natural gas in shale rock by the Poland-Ukraine border.

Russia is a top supplier of natural gas to Ukraine and the rest of Europe. The situation between Russia and Ukraine puts Europe in a tight spot for energy. After the opposition ousted Russian-backed President Viktor Yanukovych on February 22, Russian state-owned gas giant Gazprom threatened to shut off the gas through Ukraine and demanded the country pay back its $1.9 billion debt. 

Even though Europe was not technically part of the threat, their supply could be cut off since the majority of natural gas pipelines pass through Ukraine. Plus, Europe promised to help out Ukraine in every possible way, which means providing natural gas if Russia cuts them off. Ambassadors from Slovakia, Czech Republic, Hungary, and Poland sent a letter to House Speaker John Boehner (R-OH) and asked the US to export more natural gas.

It is not surprising the government in Kiev and Chevron want to uphold the contract.

“That’s the best way for (Ukraine) to become financially solvent,” said Amy Myers Jaffe, executive director of energy and sustainability at UC Davis. “It’ll take a while. It doesn’t solve the immediate crisis. But it’s definitely the way forward.”

This could ultimately decrease Ukraine’s reliance on Russian energy. Natural gas experts believe Ukraine’s shale gas reserves are the third-largest in Europe.

On April 1, Gazprom told Ukraine they scrapped the gas discount price and will raise the price. The company set the new price at $383.50 per 1,000 cubic meters and reminded Ukraine the gas supply will be cut off if Kiev does not pay back its debt.

In 1981, the CIA sent a memo to President Reagan that said the US needed to warn Europe not to build a pipeline to the then-Soviet Union and rely on them for energy. The CIA was concerned Russia would hold Europe hostage over energy.