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Ukraine is situated in Eastern Europe, north of the Black Sea and the Sea of Azov and bordered by Poland, Slovakia and Hungary to the west, Romania and Moldova to the south and southwest, Belarus and Russia to the north and Russia to the east. Principal natural resources are natural gas, oil, iron ore, coal, manganese, salt, sulphur, graphite, titanium, magnesium, kaolin, mercury and timber. With 54% of its area being arable land, an important component of the economy of Ukraine is agriculture. Ukraine achieved independence from Soviet rule in 1991.
According to The World Fact Book, estimated oil production in 2012 was 80,400 Bbls/d, ranking Ukraine 52nd in the world in oil production. Ukraine consumed approximately 1.8 trillion cubic feet (Tcf) of natural gas in 2012, with domestic production accounting for approximately 37% of the total at 694 billion cubic feet (Bcf). The remainder of supply is made up by Russian natural gas, imported through the Bratstvo and Soyuz pipelines. Oil production began in Ukraine in the 1880s but the hydrocarbon basins of Ukraine remain only partially explored due to Ukraine's historical reliance on imports and the high costs associated with drilling due to the depth at which most reserves have been found. The Ukrainian government has established a policy of encouraging domestic production to satisfy the country's internal demand and improve the country's security of supply and consequently reduce reliance on foreign imports, particularly from Russia.
Private and foreign investors are increasingly seeking opportunities in the country and are being actively encouraged to do so by the Ukrainian government as a result of its energy strategy aimed at substantially increasing domestic production.
Naftogaz is the largest of the Ukrainian state-owned companies and it dominates exploration and production. Naftogaz also owns the main oil and gas pipelines, gas processing facilities, the import and transit rights of gas and gas distribution rights in Ukraine. Naftogaz has entered into agreements with many foreign companies to enable an acceleration of hydrocarbon development in Ukraine. Cub is among the foreign companies active in Ukraine.