Ukrnafta asks NABU to bring to responsibility leadership of State Geological Service
Ukrnafta asks NABU to bring to responsibility leadership of State Geological Service

Ukrnafta has lodged a complaint with the National Anticorruption Bureau of Ukraine requesting investigation into abuse of office on the part of former head of the State Geological Service Mykola Boyarkin and current head Oleg Kyrylyuk in relation to unlawful actions by the regulator which led to non-extension of the company’s 9 production licenses expiring in 2017.

In the letter the company claims that the former and current heads of the government agency on several occasions unlawfully refused to consider and sent back Ukrnafta’s applications for license extension citing the company’s tax debt. In doing so, the State Geological Service was fully aware of the fact that such actions would lead to stoppage in production of hydrocarbons and result in significant material damage to the company, as well as to the state directly.

The letter also indicates that by committing the unlawful acts the leadership of the State Geological Service chose to ignore the decision of District Administrative Court of Kyiv (dated 11 November 2016 in court case #826/15532/16), sustained by the Kyiv Appellate Administrative Court (on 17 January 2017) and by the Higher Administrative Court (on 23 May 2017), ruling that tax debt is not lawful grounds for denial the extension of licenses and annulling the corresponding provisions of item 15 of the Procedure for issuance of licenses (#615).

In November 2016 and March 2017, the company filed 2 lawsuits to extend 3 licenses (for Zavodivske, Korzhivske and Koziivske fields) and 6 licenses (for Pivdenno-Panasivske, Anastasivske, Artyukhivske, Rybalske, Kachalivske and Lypovodolynske fields). The District Administrative Court of Kyiv has ruled in favor of the company in both cases obligating the State Geological Service to extend for 20 years and issue the said licenses. The decision concerning Zavodivske, Korzhivske and Koziivske fields was sustained in the court of appeals and entered into force. The appeal proceedings in the second case are expected in September.

The State Geological Service refused to comply with the court decision voluntarily; on 11 August 2017, the State Enforcement Service opened proceedings to enforce the court decision. However, as of 7 September 2017 the court decision has not been executed and none of the expired licenses of Ukrnafta has been extended.

The unlawful actions by the State Geological Service have already led to shutdown of a number of fields. The company has already seen a 17% decline in production of oil and gas, decline in production of LPG and almost complete shutdown of Gnidyntsy gas processing plant. The company has announced cuts in its investment programs and warned about potential loss of 1500 jobs. The stoppage of production has left without gas thousands of residents in 8 communities in the Sumy region.


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