Royal Dutch Shell, the oil giant, is to make another foray into Ukraine's lucrative oil and gas market by paying Regal Petroleum more than $400m (£195m) for a majority stake in the British company's gas fields in the region.
Regal has been the sometime laughing stock of listed London oil and gas equities but will gain some credibility from the deal. Supporters of Regal have long argued the case for its Ukraine assets, though the legal ownership of the fields was in doubt until last year after a tortuous battle in the Kiev courts.
Shell said yesterday that it had begun an eight-week period of negotiations which should ultimately result in it buying a 51 per cent stake in the business unit of Regal Petroleum that holds the licences for the Mekhediviska-Golotvschinska and Svyrydivske gas and condensate fields in Ukraine.
Under the terms of a preliminary agreement, Shell would have to pay $50m in cash for a transfer of the share capital, following it up with $360m for the development of the two fields in the Dnieper Donetsk sedimentary basin, which it would then operate.
The deal follows the failure this month of a similar agreement between Regal and Czech-based MND Exploration and Production. The two companies had begun talks earlier this year over a deal that would have seen KKCG Oil and MND invest £330m in the development of the two gas fields, in return for a 50 per cent stake in the operation.
Shell, which signed an oil and gas exploration agreement for eight licence areas in the Dnieper Donetsk basin with Ukraine's Ukrgazvydobuvannya in 2006, said that the growth potential in the two fields covered by its deal with Regal offered a "clear fit" with its strategy in the region.
Neil Ritson, Regal's chief executive, said: "We look forward to working with Shell since their commercial and technical skills will greatly assist in accelerating the field development work we have already started."Reuse content