[LINK] "Ukraine’s Effort to Cut Russian-Gas Reliance Sees Explorers Exit"

[rfmcdonald]

Bloomberg's Ladka Bauerova notes Ukraine's fuel crunch.

Ukraine’s ambition to wean itself off gas supplies from a hostile Russia has never seemed so distant.

Foreign explorers that are key to Ukraine’s future energy independence are fleeing the nation as a war against pro-Moscow insurgents in eastern regions sends the economy into freefall. Even government measures aimed at shrinking consumption of Russian gas have helped drive some international companies away.

JKX Oil & Gas Plc (JKX) halted investment last week, citing a 55 percent tax imposed on gas production and a government decision to secure supplies for households by imposing restrictions on sales to industrial customers. The company joined Chevron Corp., Royal Dutch Shell Plc, Exxon Mobil Corp. (XOM) and Eni SpA, which quit Ukraine or froze projects in the past year. Others are set to follow, according to Bloomberg Industries.

“JKX’s decision to suspend its planned natural gas field development investments in Ukraine may be followed by peers also active in the country,” Philipp Chladek, an analyst at the London-based researcher, said on Jan. 7. With the state’s curb on sales to industry and gas production tax, “economic parameters appear insufficient to justify further drilling.”

The Parliament, sworn in six weeks ago, has passed a draconian budget to unlock the next tranche of a $17 billion International Monetary Fund-led bailout and prevent a default. At the same time, Ukraine is trying to reduce dependence on gas from Russia’s OAO Gazprom, which until last year supplied more than half of demand. A 48 percent slump in Ukraine’s currency against the dollar in 2014 also cut its ability to fund imports.