"Having resources is not enough to attract investment." Under what conditions will foreign companies invest in Ukrainian subsoil? First interviewwith Duncan Nightingale, Chairman of the Supervisory Board of Ukrnafta

Ukrnafta, the country's largest oil company, which was alienated from Ihor Kolomoiskyi, can become a significant player in the EU energy market, and Ukraine can attract leading Western companies to develop its own subsoil, says Duncan Nightingale, 64. In a blitzinterviewForbes Ukraine, he explains what it takes to do this

Corporate reform in Ukraine is under pressure. Since September, the CEOs of state-owned Ukrenergo and Ukrzaliznytsia have been replaced. Despite the presence of supervisory boards in these companies, they had the characteristics of political boards. The Supervisory Board of state-owned Energoatom, the operator of Ukraine's nuclear power plants, which is regularly caught up in corruption scandals, has been unable to start working for fivemonths after its election.

Why is Duncan Nightingale, Ukrnafta's CEO, confident that he will be able to avoid pressure from the state, and how does he see Ukraine's place on the European energy map?

The interview has been shortened and edited for clarity.

Why did you decide to join Ukrnafta's Executive Board and what were your goals?

I was driven by personal reasons. Since the beginning of the Russian invasion, I have been closely following the situation through the news and social media. I wanted to do my part to support Ukraine. With my wife, we helped Ukrainian refugees in Canada get back on their feet, send their children to school, and find housing.

When the competition for the Supervisory Board of Ukrnafta was announced, I took it as another opportunity to help Ukraine with my experience. Prior to the forced alienation of shares, the company relied on poor corporate governance and business practices. There were multibillion-dollar losses. Our first priority is to fix this.

The transition to European standards should help Ukrnafta improve its operational and financial results in the long term. It is also important in the context of Ukraine's European integration. These reforms take time, because changing the culture of behavior does not happen quickly, people have to accept new practices.

At the same time, the Supervisory Board is very pleased with the work of Ukrnafta's new top management team, which actively supports and implements changes.

You have been heading Ukrnafta's SB since March 2024, how have your views on Ukrnafta changed over this time? Which expectations were met and which were not? 

The main thing was to stabilize the company's operations, and we also realized the potential of Ukraine in oil and gas production. It is enough not only to meet your own needs. "In the future, Ukrnafta may become a significant player in the EU market.

What is needed to make Ukrnafta a reliable supplier of energy resources to the European market?

Large investments in upgrading equipment and increasing staff with specialized technical skills. "Ukrnafta has long been underfunded, relying on outdated Russian and Belarusian equipment, and the introduction of new technologies has been limited.

Management and the Supervisory Board are looking for international partners for joint projects without waiting for the war to end. We are actively working in Ukraine, the EU, and North America to attract funding - grants, loans, and donor equipment.

However, because of the war, some international partners are uncertain about the feasibility of such investments. At the same time, if Ukraine did not have an impressive resource potential, there would be no discussions about possible investments at all. Therefore, I am confident that in the post-war period Ukraine will be very attractive for international business.

Despite this, Ukraine has not been able to attract investment in subsoil for many years.

"Ukrnafta has not invested in increasing its reserves for many years. However, even having resources is not enough. To attract investment, a company should adhere to the best principles of corporate governance. That is why we are actively working to implement OECD management principles at Ukrnafta.

Another necessary factor is a special taxation regime for new projects. The attraction of leading Western companies will be possible if the following factors are combined: transparency, high-quality corporate governance and business practices, government support, and special taxation regimes. Ukraine needs to be competitive to attract investment.

Can you estimate Ukrnafta's potential in numbers? In 2023, the company produced 1.4 million tons of oil. According to your plan, how do you expect production to grow in fiveyears and how much investment will it require?

We are finalizing our strategic investment plan for the next fiveyears. The results demonstrated by the management and the company over the past 18 months have positively impressed the Supervisory Board. We can say that the company's work has stabilized. Therefore, we have now set quite ambitious and challenging goals for the top management.

We cannot yet publicly announce the parameters of the strategy.

You were the head of a Canadian mining company. Would you recommend its shareholders to invest in Ukraine? 

The short answer is definitely yes. I regularly communicate with international financial organizations and Canadian entrepreneurs and emphasize the prospects for investment in Ukraine, in particular in Ukrnafta. I also provide consulting services to other oil and gas businesses, but I spend most of my time with Ukrnafta.

I cannot disclose information about cooperation with other companies, but this does not create a conflict of interest with my position at Ukrnafta. Because these companies are located in other jurisdictions.

There are now signs that corporate reform in Ukraine is under pressure. Recently, two state-owned companies, Ukrenergo and Ukrzaliznytsia, have undergone controversial management changes, despite the fact that these companies have Supervisory Boards. What do you think about these risks, and do you see any safeguards against such an impact in the case of Ukrnafta? 

I don't know the details of the examples you mentioned. I know about it only from the media and social networks, so I can't give any assessment.

As far as Ukrnafta is concerned, I am not aware of any risks or obstacles that could prevent me from fulfilling my dutiesas a Supervisory Board member. On the contrary, following many meetings with the government and Ukrnafta's top management, I am happy to emphasize that all these people are very open to cooperation.