Kiev’s state gas company has signed a deal with Royal Dutch Shell to extract gas from shale deposits in the former Soviet republic.
It comes after Kiev has said it wanted to renegotiate its 2009 supply deal with Moscow.
The country imports 60 percent of its domestic supply from its neighbour. There is talk in Kiev now of the dispute transferring to an international court.
Russian President Dmitri Medvedev has accused Ukraine of sponging, further ratcheting up the rhetoric in the pricing dispute.
Ukraine is the main conduit for Russian gas supplies to Europe and the row has disrupted supplies in recent years.
Officials have said the deal could help reduce Ukraine’s dependance on Russian gas.
Shale gas is difficult and expensive to extract.
Shell will invest almost 600 million euros in the operation.