The Company We Keep: Fracking in Ukraine, Burisma, and US Geopolitics
Means (NATO expansion) + motive (geopolitics) + opportunity (for the Biden Family) Explain the Ukrainian Quagmire
Editorial comment: this post is too long for email; please click on the header and read online or in the app.
Time to check in with the Western War in Ukraine (WWU), and today we’ll check out yet another ‘conspiracy theory’, as reported by the Russian military review Analitika in September 2020.
To me, it looks almost like the Tolkien’esque ‘one ring’ to explain virtually everything that is going on in the Collective West in the past few years: from NATO and its ongoing expansion (Finland, Sweden are in; Austria and Switzerland just joined the new air defence, ‘Sky Shield’) to the rapidly accelerating de-industrialisation of Europe’s premier industrial power, Germany, and from the propping up of ‘Azov’ Neonazi formations to the entanglements of Ukraine’s rampantly corruption oligarchs with both Western intelligence services and the Biden family business.
On that latter aspect, don’t miss out on Scott Ritter’s take: ‘Agent Zelenskyy’.
Oh, lest I forget, it’s also about Europe’s energy woes, the option of fracking in—Eastern—Ukraine, specifically: the Donbas—and Western oil & gas companies.
The below piece comes to you in machine translation (slight edits for clarity by me) and with my emphases, as well as bottom lines.
Ukraine’s Shale Gas. Burisma and its Company
Analitika, 10 Sept. 2020 (!)
Sometimes it is very useful to get to the root cause in order to better understand what is going on. Let us try to go back in time to the events that took place in the South-East of Ukraine and assess the state of affairs from the point of view of the authorities that made the decision to extract shale gas.
Let us recall that in the early 2010s, a ‘shale revolution’ took place in hydrocarbon extraction technology, which made it possible to develop shale deposits on an industrial scale. If we describe the production process in simplified terms, it looks as follows. A deep well is drilled vertically and then its direction is bent at an angle to the ground surface. Then hundreds of tonnes of a special liquid mixture, which includes acids and various active reagents, are pumped into the well under high pressure. This leads to hydraulic fracturing of formations followed by the release of shale gas, which rises to the surface and is collected by special equipment. This method is considered to be relatively cheap [ahem, none of the shale gas companies really turned a profit] for gas extraction from depleted shale formation, but it is also considered to be the most ‘barbaric’ extraction method due to groundwater contamination with dangerous [and proprietary] reagents, soil poisoning, and violation of the whole ecology in the developed areas. All living things around are killed, the earth turns into a ‘lunar surface’. [note that fracking has been banned across many European countries for almost a decade, as per this piece in The Guardian]
In the USA, the documentary ‘GasLand’, which showed the consequences of destructive shale gas extraction, made a lot of noise. A wave of public protests against shale gas extraction took place all over the world, but only a few countries in Europe managed to ban it. Ukraine, however, was not spared the ‘shale revolution’. Actually, such a decision of an ‘independent country’, at first glance, seems logical. According to Ukrgazdobycha JSC, their gas fields are more than 80% depleted, and they have even been compared to a squeezed lemon. And then there is also the volume of gas production due to natural decline, which signifies a further reduction by more than 1.5 billion cubic metres per year.
On the one hand, domestic gas production means economic security of the country as it does not need to buy gas abroad, and, if the situation is favourable, even the possibility of exporting gas to Europe. But on the other hand, it means disregard for the people living in the territories planned for shale gas production and the selfish desire of the temporary government officials to make a profit by selling everything that can still be sold.
According to the reports of Burisma [Hunter Biden’s former ‘employer’], a company known for scandalous publications in the press, in 2010-2011 it obtained licences for geological exploration and production at the Rakitnyanskoye and Niklovitskoye fields in Lviv Region [in western Ukraine, i.e., historic Galicia]. At the same time, Royal Dutch Shell conducted its hydrogeological research in Krasnolimanskiy and Aleksandrovskiy districts of Donetsk region. The results of geological exploration, apparently, were encouraging. And in the same year of 2011, the Cabinet of Ministers of Ukraine approved an unprecedented tender with the conclusion of a production sharing agreement for the production of hydrocarbons within the Yuzivska area (territory of Kharkiv and Donetsk regions) and the Olesska area (Lviv and Ivano-Frankivsk regions). To view these documents, please follow the links.
The reserves in the Yuzivska area (approx. 7.886 thousand square kilometres) were estimated at 3.6 trillion cubic metres. They contain natural shale gas, central-basin type gas, methane, oil, and condensate. [while unmentioned, I suspect that these fall in the category of ‘total reserves’; note that ‘ultimately recoverable reserves’ are typically much lower]
But the development of these fields requires a lot of money, and in 2012 Nadra Ukrayiny held a competition to attract foreign investors. The Dutch-British company Royal Dutch Shell won the tender for the development of the Yuzivska field and the American company Chevron won the tender for the Oleska field. Investors were granted a special permit for the full use of the subsoil of the area (with a drilling depth limitation of up to 10 kilometres) for a period of 50 years and with the right to extend this period almost permanently. The text of this agreement remains secret.
In January 2013, deputies of the Kharkiv and Donetsk regional councils, most of them members of [former President Viktor Yanukovych’s] the Party of Regions, presumably under pressure from above, approved an agreement on shale gas extraction at the Yuzivskyy field and sharing of the extracted raw materials between the state-owned company Nadra Ukrayiny and the companies Shell and Nadra Yuzivska. The shares of the latter, in turn, were divided between the state-owned Nadra Ukrayiny and one-day companies, whose management included people close to incumbent President Yanukovych and Prime Minister Azarov.
Betrayed and Sold
With this decision, the deputies of the south-eastern regions of Ukraine actually betrayed their voters, neighbours, and friends by giving away four and a half million people in Donbas for shale gas extraction along with the land of their small homeland. And already at the beginning of 2013, the people, outraged by the plans to extract shale gas in their region, took to the streets. Protests took place in Slavyansk, which is located in the very centre of the Yuzovska Square deposit, as well as in Mariupol, Kramatorsk, Donetsk, Kharkiv, and Izyum [oh, look, most of the heavy fighting occurred—exactly in the vicinity of these places: what a coincidence] Protesters demanded a moratorium on shale gas extraction, as it threatens the destruction of arable land in the Donetsk region and depletion of already scarce water sources, as well as pollution of underground aquifers and the Seversky Donets River. They demanded that the authorities should hear the position of the people before it was too late, stop Shell’s expansion, and return the mining issue to the legal framework through a referendum. But the authorities did not care about the people, the protected areas, and the environment.
Shale gas was planned to be extracted in Krasnolimansk, Aleksandrovsk, Slavyansk, Konstantinovsk, Artemivsk [Bakhmut], Dobropolsk, and Yasinovatsk districts of Donetsk region. The territory planned for gas extraction also included the pine-covered Krasny Liman and the resort town of Sviatogorsk with its national nature park ‘Sviatii Gori’. Svyatogorsk sanatoriums and tourist resorts, former pioneer camps, which have been taken over by well-known Ukrainian businessmen, have all been given away.
The reserves of the western field of the Oleska area (6,324,000 square kilometres) were estimated at 3 trillion cubic metres. And despite harsh criticism from Ukrainian politicians and environmentalists, in November 2013, the American Chevron Corporation (Chevron Ukraine B.V.) and Nadra Olesska also signed an agreement on hydrocarbon production at the Olesska area (Lviv and Ivano-Frankivsk regions).
In June 2014, there was already heavy fighting and the militia had to leave Slavyansk. In July of the same year, there was a plane crash. A Malaysian passenger Boeing 777 was shot down in an area of fighting in the east of the Donetsk region. In August of the same year, the famous ‘Ilovaysk cauldron’ into which the AFU had fallen slammed.
Against the backdrop of the events of hot August 2014, Royal Dutch Shell announced the suspension of work in the Yuzivska area due to the ongoing hostilities, as well as due to disappointing results of geological exploration.
In December 2014, Chevron unilaterally withdrew from the Oleska project, explaining its decision by the fact that the Ministry of Finance of Ukraine failed to fulfil its obligations to bring regulations in line with the current legislation within the established deadline. [translation: significant potential liabilities and/or additional costs would have to be borne by Chevron, in addition to the costs deriving from the—unexpectedly successful—resistance of the militias of the Donbas People’s Republics]
Both companies expected to produce first gas from the wells they drilled in early 2015, but, citing force majeure, they left.
The new Ukrainian regime that came to power managed to take control of the territories given to the investors by force. By shelling and destroying the homes of civilians, they managed to partially drive the local population off the land. However, they did not succeed in suppressing the protest sentiment and armed resistance in Donbas.
I would say that in this case, the regime that came to power after the coup d'état in Kiev is using military action against its own residents for economic reasons. They are determined to capitalise on contracts signed by the previous government.
says Nebojsa Malic, a Serbian-born American journalist.
‘Dry’ Wells
But it was not only the fighting that influenced the decision of major oil and gas companies to curtail operations in Ukraine. There were other reasons as well. Ukrainian shale gas reserves were still considered only ‘anticipated’ [read: potentially available, i.e., no-one really knows]. To determine the real reserves, a lot more money had to be invested and a lot of geological exploration had to be carried out. The first two exploratory wells drilled by Shell in the Kharkiv region (Belyaivska-400 in the Pervomayskiy district and Novo-Mechebilovska-100 in the Bliznyukovskiy district) turned out to be ‘dry’ and did not yield commercial gas flow.
And in Poland, which neighbours Ukraine, out of 68 wells drilled, not a single well has yielded shale gas in commercial quantities. Experts believe that Polish and Ukrainian subsoil is a single geological formation. That is why oil and gas giants Chevron, ExxonMobil and Royal Dutch Shell amicably cancelled their shale gas projects in Poland, too. In addition, markets saw a drop in oil prices, to which gas prices are also linked. Ukraine is in a stalemate situation: profits from the sale of the extracted gas will not be able to cover the expenses invested in its extraction.
In addition, [Ukraine’s parliament] Verkhovna Rada raised the gas extraction royalties from 20 to 70%, which also negatively affected the profitability of production and shocked private producers. Some companies, such as the British company JKX, are now suing the state.
The peculiarities of Ukrainian-style business are when the terms of the deal are constantly changed by the Ukrainian side after the agreements are signed [now that’s an understatement worthy of consideration]. All foreign companies attracted to Ukraine by generous promises should be prepared for this. After a sharp drop in the price of gas on the market, Ukrhazvydobuvannya partially froze the projects of drilling new wells concluded with foreign companies. And the companies that had imported their drilling equipment to Ukraine thought about leaving the country or reoriented towards private gas producers.
Andriy Favorov, head of Naftohaz Ukrayiny, said:
Now the goal is not cubic metres, but to reduce risks when drilling new fields and increase the probability of successful drilling.
Experts predicted that US companies or banks are unlikely to finance shale projects in Ukraine unless the US government itself provides funds.
Of course, the best way to demonstrate your altruism, humanitarianism and commitment to the free market is to criticise a corrupt country, then sponsor a coup that overthrows a government accused of corruption, and then appoint the sons and friends of US officials to the boards of companies with interests in that country. This, of course, is perfectly legal and very honest.
Thus concluded Serbian-American journalist Nebojsa Malic.
Burisma
Just like that, Burisma emerges from the ‘second tier’ of teams for the finals. Its website states:
Burisma Group is the largest private gas production group in Ukraine. The company is the only vertically integrated holding in the country, which carries out exploration, production, service, and sale of hydrocarbons.
It is clear that it is the largest, because the company was able to obtain licences for the development of fields in three oil and gas bearing basins of Ukraine: Carpathian, Dnieper-Donetsk, and Azov-Kuban.
The ‘ascent to Olympus’ began in 2008, when Burisma Holdings acquired two subsidiaries of the American Sunrise Energy Resources (‘Esko-Pivnich’ LLC and ‘Pari’ LLC), which had licences to develop Ukrainian oil and gas fields since 2004. ‘Esko-Pivnich’ for the Karaykoziyskoye field, Rakitnyanska and Roganska, areas in the Kharkiv region and ‘Pari’ for the Niklovitskoye field of the Peremyshlanska and Chukvynska areas in the Lviv region, the Pilipovskoye field (Ivano-Frankivsk region), and the Sheremetyevskoye field (Chernivtsi region).
In 2010, Burisma, having obtained 5 exploration licences, drilled its first 8 wells at the Rakitnyanske and Niklovitske fields in Lviv oblast. According to 2015 reports, Burisma drilled 63 wells, and in 2019 they counted already 154 wells.
In May 2014, Robert Hunter Biden, son of US Vice President Joe Biden, joined the board of directors of the Burisma oil and gas holding company, and the company developed plans to produce shale gas in Ukraine. After Chevron and Shell left the scene, the Biden family apparently decided to realise their little gesheft [Yiddish for (shady) business]. The US supported the reforms of the Yatsenyuk government, which, at the request of the IMF, raised gas tariffs for all categories of consumers by an average of 280% on 1 April 2015. Naturally, the profitability of gas production also increased. And later, the daddy himself—Joe Biden —flew to Kyiv and told the Verkhovna Rada that Washington supports the Ukrainian authorities ‘in the face of humiliating threats’. But his ‘technical assistance package’ consisted mainly of recommendations for more efficient use of energy and shale gas extraction from Ukrainian fields.
In April 2019, after scandalous publications in the media, and officially ‘at the end of his term’, Hunter Biden resigned as a member of the Board of Directors of Burisma Group. But even today, Burisma's Board of Directors consists of two outstanding personalities: Aleksander Kwasniewski, former President of the Republic of Poland from 1995-2005, under whom the country changed its course from socialism to democracy; and Joseph Cofer Black, former head of the CIA’s Counterterrorism Centre in 1999-2002, who received the CIA’s highest award, the ‘Intelligence Medal of Merit’, for his service. Black is also vice-chairman of the well-known American PMC Blackwater Worldwide (now renamed as Academi).
When Biden’s son held a seat on the Board of Directors of Burisma Group, there was a series of scandals and arrests. It turned out that in 2014-2016, the company had been dodging about one billion hryvnias in tax evasion by diverting profits to fictitious expenses through shell companies. According to a Ukrainian court ruling, Burisma was banned from selling the extracted gas and 46 wells in five regions were seized. The case was hushed up, but companies close to the Biden family disappeared from the case. In 2016, Burisma increased its Ukrainian investment portfolio by buying the company KUB-Gas from the Canadian Serinus Energy. In addition, Burisma added the most powerful rig SK 3000 to its drilling fleet of 20 rigs. Emphasis is placed on the ability to drill wells up to 10,000 metres deep. Burisma is also gradually increasing its gas production volumes, which reached 1.08 billion cubic metres in 2018. The company is drilling new wells deeper than 5,000 metres and rehabilitating old wells using hydraulic fracturing (fracking). But these are all very costly and labour-intensive activities on the verge of risk.
The results [as of 2020]
There was no happiness, but misfortune helped…
Due to the shutdown of a number of production facilities, Ukraine has been consuming less gas in recent years. Thus, in 2014 the volume of its own consumption was 42.6 billion cubic metres, and by 2019 it has decreased to 29.8 billion cubic metres. But even today, despite all efforts, domestic production makes up a little more than half of its own consumption, and the missing volumes are filled by imported gas. After the refusal to buy Russian gas, a new trend has emerged: Ukrainian UGS facilities offer their services for temporary storage of European gas. Yes, we already know how ‘leaks’ from storage facilities and other ‘unforeseen’ withdrawals of other people's gas happen.
Excursus: I and others have written about this; it is known as ‘reverse gas’, which works like this:
Country A doesn’t want to buy Russian gas but needs it dearly.
Country B still imports Russian gas and may sell it to Country A.
Corollary: Country B—or the importing company—may impose a surcharge for ‘services rendered’.
Now substitute ‘Country A’ with Ukraine in 2015, ‘Country B’ with Hungary’, and ‘the importing company’ with ‘Naftogaz’. Apart from Joe and Hunter Biden, as well as the US intelligence ‘Borg’, these shenanigans also involved one Amos Hochstein, then VP Biden’s ‘energy advisor’. Full treatment below:
https://fackel.substack.com/p/gas-tantrums-episode-iii (autumn 2021)
And now back to the analysis.
Here is a map on which is marked the territory of the Yuzovskoye gas field transferred to foreign companies and the border of demarcation of forces in Donbass. As can be seen by looking at this map, the defenders of Slavyansk would have had no chance of holding the city. Sooner or later they would have been knocked out of there, if not by the AFU, then by American PMCs. Now this entire territory is the property of investors, who will squeeze everything out of it, scoop out the subsoil to the ‘bottom’ in order to return all the millions invested—plus interest. Continuation of military operations on the borders of the deposit will lead to further exodus and reduction of the local population.
Now the motives of the American government’s military aid to Ukraine and Russia's reaction to everything that is happening become clear.
‘What about shale gas?’
‘Ukraine has started producing gas using the fracking method’, Naftohaz head Andriy Kobolev said in November 2016. It was reported that Ukrgasdobycha applied ‘fracking’ (hydraulic fracturing) for the first time at a gas well. But later, the press service of Naftohaz hastened to reassure the population, saying that there were no plans to produce ‘shale gas’. Most likely, it was about the reconstruction of an old well by hydraulic fracturing (fracking) to stimulate its efficiency. According to Naftogaz reports, 464 hydraulic fracturing operations have been carried out on 253 wells since autumn 2016.
This year [2020], the company is carrying out hydraulic fracturing operations on wells with a depth of more than 4,000 metres.
You may ask what the difference is. In my opinion, it is practically the same thing, ‘only in profile’. It is just that the word combination ‘shale gas’ is a taboo, which has been replaced in the media with the words ‘fracking’ or ‘hydraulic fracturing’. But the damage to the environment will not diminish from this.
In addition, some experts warn that the consequences of fracking are not fully understood and may cause microearthquakes that could disrupt the integrity of nuclear waste disposal in Southeast Ukraine and lead to a large-scale disaster near Russia’s borders.
Bottom Lines
Provided the above account is (even halfway) correct, I think we have a pretty good picture now about the origins, genesis, and proximate causes of the Ukrainian quagmire.
First, there is the geo-strategic aim of the US elites (‘blob’, or ‘Borg’) to prevent any kind of potentially long-term arrangement between ‘Europe’ and Russia. The proximate means of doing so are the Siamese twins of NATO enlargement because of ‘threats emanating from Russia’, which, of course, are mainly due to NATO expansion. Prima facie evidence of this stems from Mr. Putin’s speech in the Bundestag in the early 2000s, which he gave in German, offering a mutually beneficial long-term partnership—whose main losers would be: the US and its lapdog, the UK.
Second, the main wedge to accomplish this were to be the poor and repeatedly abused peoples of East Central and Eastern Europe, as well as in the Caucasus. So-called ‘Colour Revolutions’ occurred in Serbia and the Ukraine in the early 2000s, followed by Georgia (the country, not the US state) and, again, Ukraine in 2014. All three countries were subsequently involved in US-orchestrated military operations: in 1999, the US-led coalition waged an illegal war of aggression against Yugoslavia; in 2008, the US made Georgia to start shelling South Ossetia, prompting a Russian response; and the history of the ‘Maidan’ coup d’état in 2014 rounds this off. By serially provoking Russia to respond militarily, the US ‘Borg’ managed to keep anxiety levels high esp. among the Baltic peoples (Estonia, Lithuania, Latvia), Poles, Romanians, and Moldovans, ‘whose’ (?) gov’ts are the most viscerally Russophobic ones in Europe.
Third, orchestrating these shenanigans may have been a ‘personal’ matter for many leading US ‘neocons’ due to their own family histories (i.e., East Jewish ancestry, i.e., the most viscerally anti-Czarist, anti-Bolsheviks whose ancestors moved to the US around 1900, incl. Victoria Nuland and her husband, Robert Kagan, who is affiliated with the premier neocon think tank). While I won’t rule out such notions, the main operating principle was to get mainstream US leadership aboard, which has been done, via the Biden Family during Joe’s tenure as Vice President under Obama, by graft and corruption. In other words: that quintessentially human interest—in Biblical terms, we’d call it ‘man’s lust for gold’, according to St Timothy—driving these developments (‘10% for the Big Guy’).
In short:
Means (NATO expansion) + motive (geopolitics) + opportunity (for the Biden Family) = Ukrainian Quagmire