Socio-Economic Potential of Unconventional Gas Development in the Kharkiv Region

Kharkiv region is a key industrial region of Ukraine accounting for more than 47% of national gas production (9.4 bcm in 2014). In 2013, the location quotient for gas production amounted to 7.3 – the number of times by which the region outstripped the standard gas output per population concentration. This industrial sector is of fundamental importance to the regional economy – it accounts for 7% of GRP and forms a basis for other sectors: oil and petrochemical industry, energy production sector, pharmaceutical industry and manufacture of construction materials.

It is important to note that most investments by production companies in the regional economy are made at the level of raions and communities situated around the extraction site. As a rule, corporate social responsibility policy provides for the partnership with local companies. For example, Shell undertook to choose Ukrainian goods, works and services, provided that equal or better terms and conditions concerning price, time schedules, quality, supply terms and other criteria as well as conformity to international standards are ensured. At the existing facilities, most main works (pad construction, service water well drilling, supply of slabs and fuel, equipment delivery, security services, construction camp arrangement and maintenance, and associated works) were performed by Ukrainian contractors.

Based on local proposals agreed with the raion authorities, Shell spent minimum 2.7 mln UAH on implementation of such projects as replacement of heating systems and roofs in schools, overhaul of kindergartens, street lighting installation, road repair, purchase of drugs for raion hospitals, and construction of artesian well for drinking water supply. As for the Yuzivska project, Shell obligations related to social investments provide for spending at least 2 mln USD per year in such fields as education, health care, environmental protection, ensuring access to quality drinking water, development of entrepreneurship, road traffic safety, and public culture. Thus, under this project central raion hospitals and rural first aid stations in the Izium Raion and Barvinkove Raion of Kharkiv region received medical equipment worth around 200 000 USD.