PJSC Ukrnafta has received a new notification from the State Service of Geology & Mineral Resources of Ukraine about withdrawing 14 of its licenses for hydrocarbon production at its oil fields in Ivano-Frankivsk and Lviv regions. According to the order #253 of the State Service, operations at the above-mentioned production fields may be suspended in September. Among the main reasons, the service indicates the company's unpaid rent tax debt.
To prevent another negative situation similar to the one that took place in February of this year when four villages of Dnepropetrivsk region were left without gas supply, Ukrnafta believes it is necessary to explain the potential negative consequences and make sure correct contingency planning is completed.
Apart from obvious environmental risks, such as technological deterioration due to extended well downtime; suspending special permits will worsen the state's energy dependency through losses in hydrocarbon production (285 ktonnes oil with condensate and 135 mln m3 of gas per year). Such methods of the state service will also deprive 1800 persons of their jobs in the longer term, and the State budget of valuable tax revenue.
Mark Rollins, Chairman the Executive Board of Ukrnafta:
“I should be clear that Ukrnafta is opposed to this decision as it is not in anybody’s interest. The remarkable thing about the intensified efforts of the State Service of Geology & Mineral Resources on licenses suspension is the timing, which happened to be right before the upcoming General Meeting of Ukrnafta’s Shareholders, where it’s planned to vote for the start of the financial recovery of the company. This legal process aimed at preventing bankruptcy will enable Ukrnafta not only to pay off debts to its creditors but will also create necessary condition for the company to maintain its core operations, i.e. production of oil and gas, which serves as its main source for accumulated tax liabilities repayment, including the rent tax. However, licence suspension not only jeopardises the company’s financial rehabilitation but threatens the existence of Ukrnafta, and undermines the viability of the oil and gas industry of the country. We believe that there is a better way forward.”
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