Ukrnafta PJSC confirms receiving the decision of State Geological and Mineral Resources Service on suspension of the three of its subsoil use licenses in Yurievka, Golubovka and Lopushna fields due to its royalty tax liabilities. According to the document, Ukrnafta must repay its tax debts within 30 days to have its permits renewed.

However, the company has already communicated to the State authorities the extremely damaging outcomes of such an action. If the decision is upheld then Ukrnafta will have to shut in production on the licences concerned. This will reduce revenues to the company and payments to the State in form of taxes and royalties will actually be reduced. If the situation persists for any long period then the employment of the workers on the oil fields concerned will be at risk.

"We are very concerned about this decision, because at this time of low oil prices the company is not generating enough additional cash to pay more than its current tax obligations. A reduction in our ability to produce oil is counter-productive and does not help anybody. The tax debt is a longstanding problem and we are holding a dialogue with the government on this. In the meantime we will appeal to the government to see good sense and reverse this illogical decision", said Mark Rollins, Ukrnafta's Executive Board Chairman.

He also stressed that, among other negative impacts, reduction of oil production in Ukraine would affect its GDP, cause an increase in oil product imports and reduce employment in the country.

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