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Chevron Shale Exit Shreds Ukraine’s Hope of Energy Independence

Bloomberg News

Shale gas was supposed to be Ukraine’s ticket to greater energy independence from Russia. Chevron Corp’ s decision to pull the plug has smashed those hopes.

The second-largest U.S. energy producer will pull out of an agreement for exploring the Oleska field in western Ukraine, a government official said this week. It was the final blow to the country’s dream of becoming a big shale-gas producer after Royal Dutch Shell Plc (RDSA) retreated earlier this year from a similar deal in eastern provinces riven by a bloody war with pro-Russian separatists.

While Chevron can walk away unscathed, for Ukraine it’s another blow to the prospects of reviving a chaotic economy that remains dependent on Russia, a country it claims to be in armed conflict with. Already weighed down by the war that’s killed more than 4,600 people and teetering on the verge of default, Ukraine was counting on foreign capital to develop its domestic gas resources.

“Foreign investment will start to flow only if there is a healthy, predictable investment environment based on the rule of law,” said Ulrich Benterbusch, managing director at German energy agency Dena. “This includes drastic measures to reduce the endemic corruption.”

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