* Chevron deal would be second shale agreement in Ukraine
* Ukraine sees shale as alternative to costly Russian gasimports
KIEV, Aug 20 (Reuters) - Prospects of a new shale gas dealin Ukraine hit a setback on Tuesday when a local council votedagainst an initial draft production-sharing agreement with U.S.energy major Chevron, an official said.
The official, who did not wish to be named, told Reutersthat deputies in Ivano-Frankivsk region, in the west of thecountry, had sent the draft back to the government, pressing forguarantees which would address their concerns over theexploration plans.
Chevron wants to tie up a deal to explore the Olesska shalefield in western Ukraine. Royal Dutch Shell has alreadysigned a $10 billion deal for shale exploration and extractionat the Yuzivska field in the east of the ex-Soviet republic.
According to the council's website, deputies had concernsover the ecological consequences of shale exploration in amountainous forest region known for inland tourist resorts.
The "fracking" process, in which water and chemicals areused to break up rock, sandstone and shale deposits to releasegas, has sparked opposition from environmentalists who fear itcan pollute underground waterways.
But the Kiev government sees shale gas development as a keyto easing its dependence on costly gas imports from Russia whichweigh heavily on its economy.
Ukrainian Fuel Minister Eduard Stavytsky was quoted by UNIANnews agency as saying that Chevron has proposed investing $350million in initial tests to ascertain the commercial viabilityof gas deposits at the Olesska field, with a $3 billioninvestment envisaged for the first stage of extraction.
Stavytsky told Reuters by telephone: "We will consider theproposals (from the council) and in mid-September there will beanother vote.
"There is nothing dramatic in what has happened. This is thenormal working process," he said.
Assuming that Ivan-Frankivsk council finally supports thedeal, it will still require the approval of a second council inLviv region for the deal to be concluded.
