On November 13, the Ukrnafta auction # 252 failed at the Ukrainian Energy Exchange. No bids were received from the buyers for the sale of oil and gas condensate. As a result of the auction failure, Ukrnafta did not receive about UAH 6.6 billion of net income.
Total volume of unsold products, including auctions that have failed before amounted to about 500,000 tons, including production in November and December. This equals 4 months production. The company has put up for sale 85 items ranging from 17 to 9,000 tons in volume.
Although Ukrnafta has stabilized and slightly increased hydrocarbon production for the second consecutive year, problems with the sale of oil and condensate through state-imposed restrictions remain unresolved, despite numerous requests from the company to the Government to address this issue.
Since the beginning of this year, due to the absence of buyers, 9 of the 16 auctions at which Ukrnafta was legally obliged to sell oil and condensate at the starting prices set by the state auction committee have failed. Start-up pricing formulas link them to the import parity, so they may substantially exceed the prices at which Ukrainian oil refining companies can import or buy it on the domestic market.
The company has repeatedly pointed to the Government on this issue and has suggested the change of the current order of sale of liquid hydrocarbons, because due to non-market pricing it cannot ensure rhythmic sale of Ukrnafta’s oil and condensate. Restrictions on the sale of raw materials adversely affect Ukrnafta's financial performance and the Company’s ability to finance its investment program.