Ukrnafta expects 15% decline in oil production in 2017

According to Ukrnafta’s estimates, the company may see a 15% decline in oil production in 2017 vs 2016. With the rent rates for oil and condensate high and the legacy tax debt unresolved, the company will not have sufficient resources to implement a capital investment program.

In January-September 2016, the company was able to spend only UAH 391 mln in capital investments, i.e. 15% of the minimal investment level. In order to maintain the current level of output the company needs to invest at least UAH 2.6 bln in equipment upgrades, workovers of existing and drilling of new oil wells.

The current rates of rent for extraction of oil and condensate are 45% for deposits above 5,000 meters and 21% for deeper deposits. The rent rates for extraction of natural gas are 29% and 14% correspondingly. Ukrnafta has advocated for a proposal to equalize the rent rates for oil/condensate and natural gas. According to Deloitte’s 2015 research report, the average rate of royalty and similar taxes on hydrocarbons in the EU countries was 12%.

Earlier the company reported that in 9 months 2016 its output of oil declined by 10%, natural gas by 14%, and LPG by 16% compared to the same period of last year.


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