Chevron and Shell near Ukraine gas deals Chevron of the US and Royal Dutch Shell are set to be named by Ukraine ahead of three other energy majors to explore two vast fields for unconventional natural gas resources, according to someone familiar with the situation. The developments are likely to be the largest foreign investment in the country to date. The tender could lead to some of the biggest shale gas extraction projects, using US-developed technology, in central and eastern Europe. Ukraine is betting that the investment and knowhow of energy majors will replicate the production boom that has transformed the US in recent years from an importer to net exporter of natural gas. Kiev hopes the multibillion-dollar projects will lure other big foreign direct investments and help, in the long term, to reduce its fragile economy's heavy dependence on increasingly expensive Russian gas imports. "Overall, the investment proposals of the winning bidders - Chevron and Shell - involve sums twofold larger than the minimum requirement set by tender rules," said one senior official. Eduard Stavitsky, Ukraine's ecology and natural resources minister, was on Thursday quoted by the Interfax-Ukraine news agency as saying that the Ukrainian cabinet had approved the winning bidders and that an announcement would be made "shortly." ExxonMobil, Italy's Eni and Russian-British TNK-BP also bid in the tenders, which were launched in February. A Ukrainian official said they are being urged to bid in new round of subsoil and offshore exploration tenders to follow in coming years. According to the US Energy Information Administration, Ukraine has some of the largest shale gas deposits in Europe, with some 42tn cubic feet of technically recoverable resources. As a winning bidder in Ukraine's first big exploration tender, Chevron would hold the exclusive right to sign a production-sharing agreement for the Olessky field in the western part of the country. According to Ukraine's state geological service, it holds gas reserves of 8bn-1.5tn cubic metres. Shell stands to ink a production-sharing agreement for the Yuzivska field in eastern Ukraine. Local officials estimate it holds 2tn cubic metres of gas. A government source said that a minimum of $170m is to be invested into exploration into the Olessky field over five years, and about $200m into the Yuzivska region. If commercially viable gas resources are found, billions of dollars are expected to be invested, the source added. Ukraine government plans envision that the companies will be able to unearth hydrocarbons using traditional extraction, revolutionary shale technology, coal bed methane, crude oil and condensate. They will form joint partnerships with Nadra, a state mineral resources company. SPK-Geoservice, a private domestic company owned by Ukraine's leading geologists, has been chosen to be Nadra's partner in the project. Some diplomats and bidders, foremost TNK-BP, have expressed concerns over the transparency of the decision to choose SPK-Geoservice and give it a minority stake in the project. But diplomats and insiders suggested those concerns were not big enough to undermine the strategically important projects. Ukraine hopes domestic unconventional gas sources could transform the outlook for its particularly energy-intensive and inefficient economy. Foreign energy companies are eyeing the promise of uncovering of new resources in a new market. Ukraine's underinvested energy sector is heavily controlled by domestic oligarchs and Russian groups. Ukrainian officials hope the new investors will replicate the US's success in unlocking vast reserves using horizontal drilling and hydraulic fracturing, or fracking. The process, which involves high pressure injection of water and chemicals to free up trapped gas, is now being exported to Europe. Of particular concern for Ukraine, which faces a shortage of drinkable fresh water, are warnings from environmentalists that the process could contaminate underground water supplies. But the prospect of unlocking fresh resources and reducing reliance on Russian gas imports has so far outweighed those concerns. The American Chamber of Commerce in Ukraine says the decision to open its energy sector to foreign companies could bring in "multibillion-dollar investments" and serve as a "game-changer" in the government's goal of "energy independence." Kiev has been pushing hard for two years to negotiate lower import prices from Russia. But Moscow has driven a hard bargain. It is promising lower prices only if Kiev relinquishes control over its vast gas transit pipeline system, which handles the bulk of Russian exports to Europe, or joins a Russia-led customs union.