PJSC Ukrnafta has called on the General Prosecutor’s Office (GPO) to become party to the court case concerning the licenses for Svystunkivske-Chervonolutske field. The lawsuit filed by Ukrnafta against the State Geological Service and Arkona Gas-Energy will be tried by the Kyiv Administrative Court of Appeals on 21 February 2018.
Ukrnafta draws attention of the GPO to the fact that license #4830 of 18 May 2017 was awarded to Arkona without a public auction. Moreover, Arkona paid UAH 3.8 mln in license fees whereas, according to Ukrnafta’s estimate, the real value of the license is up to UAH 110 mln. This estimate is based on the results of the geological exploration conducted by Ukrnafta at this field between 2004 and 2010 and approved by the State Commission on Reserves of Natural Resources. They show that the producing reserves for the Chervonolutske area alone stand at 1.06 bln m3 of gas and 96 ktonnes of condensate. Whereas, the license issued to Arkona features much lower producing reserves: 320 mln m3 of gas and 17 ktonnes of condensate. Ukrnafta notes that neither Arkona, nor other companies performed any additional exploration of the field.
Ukrnafta believes that such a significant decrease in the reserves of the Svystunkivske-Chervonolutske field vs the levels recorded by the government is unjustified and explains a much lower license fee. The company also believes that license #4830 was issued in violation of due legal process and has damaged the interest of the state and Ukrnafta.
The situation around the license for the Svystunkivske-Chervonolutske field underscores the fundamental drawback of the licensing system in Ukraine. As there is no single license covering both exploration and production, any serious investor would be deterred from exploration, as he cannot be sure that he will be allowed to produce.
Note to editor
The Svystunkivske-Chervonolutske field is located in Poltava oblast. As per minutes of the State Commission on Reserves of Natural Resources #2148 of 21 December 2010, the producing reserves for the Chervonolutske field were recorded at 1.06 bln m3 of gas and 96 ktonnes of condensate. The total/producing reserves for the Svystunkivske area were recorded at 548 mln m3 of gas and 60/30 ktonnes of condensate. Ukrnafta performed exploration of the field under 10-year license #2501 issued on 20 July 2004. Subsequently, Ukrnafta took steps to extend the exploration license and intended to obtain a production license as the company that had prepared the field for commercial development. Ukrnafta filed a lawsuit with the District Administrative Court of Ukraine against the State Geological Service and Arkona Gas-Energy on 14 November 2017.
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