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China invests in Ukraine’s Black Sea Shelf

August 29, 2010

Well dear readers, China and Ukraine have signed an agreement to develop the Black Sea Shelf, home to an aweful lot of untapped oil and gas.

It is of course, early days, and the agreement signed was for a mear $200 million which would suggest a deal has been done over exploration of a particular zone on the Black Sea Shelf or some form of on shore refinery.  Quite simply the money is not big enough for anything more major than that.

From people I know in high places, the Black Sea Shelf has been zoned into numerous plots which can and will be allocated or tendered to interested parties although quite a number of the best zones involve deep sea drilling and would render the amount of entities capable of carrying out the drilling fairly small.

Certainly I know BP, Shell and Chevron have expressed an interest but I am not sure how far they have gone in negotiations.

After all, tenders are expensive, exploration is expensive, drilling is expensiv, refining is expensive and then there is the split between Ukraine and contractor as well on profits on the commodity.

MP Valeriy Konovaliuk stated "This is only the start of the realization of large scale bilateral projects".

Of course the benefits to China and Ukraine, both of whom have large energy ties relating to Russia are quite obvious by removing Russia from this very small part of the energy equation of the region.  The question will be, how much of the Black Sea Shelf will Ukraine allow China to develop without souring other important bilateral relationships?

Anyway, progress nonetheless.

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