Moving to end its dependence on natural gas imported from Russia, the Ukrainian government announced this week that it has reached a $10 billion shale gas exploration and production-sharing agreement with energy giant Chevron.
The transaction, which could have huge geopolitical implications given the former Soviet republic's push to shed its reliance on Russian energy, has yielded roles for Morgan, Lewis & Bockius and independent Ukrainian shop Asters, the second Ukraine-centered deal in which both firms have had a hand this year.
The Am Law Daily reported in January that both firms had advised a company affiliated with the Ukrainian government as it sealed a $10 billion joint venture with Royal Dutch Shell at the World Economic Forum in Switzerland. While that deal focused on shale gas fields in Ukraine’s eastern region, this week's transaction involves the Oleska field in the western part of the country, which is thought to possess vast natural gas reserves.
Moscow-based business and finance partner Jonathan Hines is leading the Morgan Lewis team advising state-owned Nadra Oleska in connection with the Chevron joint venture. The other lawyers from the firm working on the matter include energy transactions partner David Asmus and associates Ksenia Lopatkina, Alexander Marchenko and Jennifer Mosley.
Hines, who joined Morgan Lewis last year from now-defunct Dewey & LeBoeuf, and the Houston-based Asmus, who arrived in 2009 from Baker Botts, have been busy in recent months working on a string of notable energy deals.
Asmus advised Texas-based Newfield Exploration just last week on its $900 million exit from Malaysia, according to sibling publication The Asian Lawyer, and The Am Law Daily reported this summer on Hines handling the nearly $3 billion sale of Moscow-based Itera Group to Russia's state-backed Rosneft in a deal that helped consolidate the Kremlin’s grip on the country’s energy industry.
Asters is also advising Nadra Oleska on the Chevron deal through Kiev-based senior banking and finance partner Armen Khachaturyan, corporate and natural resources partner Tamara Lukanina and associate Yaroslav Petrov.
Separately, Asters and Morgan Lewis are acting as outside counsel to state-run Nadra Ukrayny—which owns and operates Ukrainian shale gas companies throughout the country—on yet another joint operating agreement, this one with an ExxonMobil-led consortium looking to tap into the Black Sea's Skifska gas field. Though that agreement was announced in August 2012, the parties have not yet signed a formal deal or worked out the specifics of a planned production-sharing agreement.
Chevron spent months negotiating its 50-year accord with Ukraine, which was announced Tuesday in Kiev. Ukraine's President Viktor Yanukovych has said publicly that he hopes his country's deals with Chevron and Shell will allow it to reach full energy independence by 2020. At the moment, Ukraine is locked in a trade war with Russia over chocolates, with the latter attempting to use its energy prowess to strong-arm the former Soviet republic back into its sphere of influence.
Chevron—which is currently keeping a bevy of Am Law 100 lawyers busy in a federal courtroom in New York in a case involving its operations in another part of the world—has not identified the legal advisers working on its Ukrainian shale play.
Robert Denham, a senior corporate partner with Munger, Tolles & Olson in Los Angeles and a lead independent director at Chevron, told The Am Law Daily that the company’s board doesn’t get involved in hiring outside counsel for ordinary course transactions like the Ukraine deal. (Enrique Hernandez Jr., a former associate at now-defunct Brobeck, Phleger & Harrison, also sits on Chevron's board.)
Media representatives for the San Ramon, California–based oil giant did not respond to requests for comment about its external legal advisers on the transaction, nor did Chevron general counsel R. Hewitt Pate, who took over in 2009 as the company’s in-house legal chief.
At the time Pate—whose predecessor, Charles James, was honored as an American Lawyer Lifetime Achiever in September—moved into the job, sibling publication The National Law Journal put Chevron's annual legal budget at roughly $350 million. In the years since, the company's bitter fight to scuttle a $19 billion environmental judgment rendered against it in Ecuador has caused its legal expenditures to swell.
Annual payments to outside attorneys and other professionals on Ecuador-related issues alone have hit $400 million, according to a report earlier this year by The American Lawyer’s Michael Goldhaber, who has been filing regular dispatches from the federal RICO trial now under way in Manhattan that pits Chevron against plaintiffs’ lawyer Steven Donziger. (Click here for Goldhaber’s 2011 feature story on Donziger and Chevron’s tortured history in Ecuador.)
Back in 2001 Chevron completed its $45 billion acquisition of rival Texaco, a deal that landed key roles for five large firms. In recent years Chevron has turned to Skadden, Arps, Slate, Meagher & Flom for high-end transactional work. Skadden advised Chevron three years ago when it sought to expand its shale gas holdings by acquiring Atlas Energy for $3.2 billion, according to our previous reports.
Skadden, which didn't return a request for comment about whether it advised Chevron in connection with its Ukrainian accord, happens to have close ties to the country, having been retained by Yanukovych in 2012 to investigate the circumstances surrounding the jailing of former prime minister-turned-opposition leader Yulia Tymoshenko.
In a 303-page report issued late last year, the firm found that while the high-profile proceedings against Tymoshenko were indeed flawed, political considerations had not influenced the Ukrainian government’s case against her. The report's findings, which triggered a brawl in Ukraine's parliament, were at odds with those compiled as part of a previous inquiry conducted by Covington & Burling. (European Union mediators headed to Kiev this week to seek Tymoshenko's release.)
While respect for the rule of law has been an issue in Ukraine—a recent annual report by the U.S. Trade Representative found it to be among the world's worst offenders in terms of protecting intellectual property rights—the country's energy and agricultural sectors have yielded opportunities for international firms.
As The Am Law Daily reported last month, Squire Sanders has forged an alliance with a top firm in Kiev. The Ukrainian government has also been active in hiring U.S. law and lobbying firms to advocate for its interests in this country.
Chevron, of course, also boasts strong ties to Capitol Hill.
U.S. Senate records show that Akin Gump Strauss Hauer & Feld—a firm that has done work for Yanukovych’s government and lobbied on behalf of Ukraine's richest man—had earned $270,000 through the end of September for its lobbying work on behalf of Chevron. Others benefiting from the company’s lobbying largesse include BGR Group, Capitol Counsel, Richard Hohlt, TwinLogic Strategies, and Dow Lohnes Government Strategies (the latter is currently on the auction block).
As for Ukraine, it may soon have a new leader familiar to American fight fans. Former heavyweight boxer and titleholder Vitali Klitschko announced last month that he is planning to seek the country's presidency in 2015.