Crimea: the Oil and Gas Story

As it happens, Crimea’s oil and gas resources could be significant.

To start with, the Skifska license block – which lies to the southwest of Crimea in the Black Sea – is estimated to hold up to 8.8 trillion cubic feet in natural gas and condensate resources (source: Ukrainian Government).

Royal Dutch Shell plc and Exxon Mobil Corp. were chosen in August 2012 by the Ukrainian government to lead the development of the block, with exploration due to begin in 2015 [source: Ukrainian Government]. However, Shell pulled out of talks about developing Skifska in January while ExxonMobil said in early March it was putting its involvement in the project on hold.

The Skifska development – which Exxon Mobil believed capable of producing 177 billion cubic feet of gas per year – had been a key project that the Ukrainian government hoped would help give Ukraine some measure of energy independence from Russia.

The question now is whether Skifska remains a Ukrainian asset or if Russia could simply declare it a Crimean (i.e. Russian) asset. And there have been noises suggesting that Crimean oil and gas assets should now be managed by Russian companies, with the speaker of Crimea’s Moscow-backed parliament telling Russia’s RIA news agency in mid-March that Russian companies such as Gazprom OAO should be involved in Crimea’s oil and gas production.

Meanwhile, there is also potential to explore and develop resources off the eastern coast of Crimea. In November, Italy’s Eni S.p.A. said a 540-square mile area it had signed up to explore, located in the eastern part of the Crimean peninsula, “offers signification exploration”.

The area includes a license for the Subbotina block, where an oil discovery has already been made, as well as licenses for the Pry Kerch block, where several oil and gas prospects have been identified.