Ukrnafta calls on the Office of the Prosecutor General to protect state interests in the dispute over the Svystunkivsko-Chervonolutske field
Ukrnafta calls on the Office of the Prosecutor General to protect state interests in the dispute over the Svystunkivsko-Chervonolutske field

On 23 March, the company appealed to the Prosecutor General's Office with an initiative to review a court ruling that dismissed a lawsuit filed by the Deputy Prosecutor General of Ukraine to invalidate a special permit for subsoil use issued to Arkona Gaz-Energiya LLC under newly discovered circumstances by filing a relevant application with the District Administrative Court of Kyiv.

Now the NABU is actively investigating this illegal transaction with the participation of, among others, officials of the State Agency for Geology and Mineral Resources and Arkona Gaz-Energiya. The NABU detectives have already filed charges against the six individuals for corruption offences related to the issuing of a special permit at an undervalue without a tender, which caused material damage to the interests of the state that did not receive fair compensation for granting oil and gas production rights at the Poltava oil and gas field for 20 years.

As a victim in the criminal proceedings, Ukrnafta obtained access to some of the materials of this investigation. Ukrnafta believes that the Prosecutor General's Office now has grounds and the right to apply to a court for a review of a court ruling, which ruled that the issuance of a special permit to Arkona Gas-Energiya was legal, under newly discovered circumstances. The Prosecutor General's Office is not a procedural head in this criminal case, and therefore Ukrnafta, as an aggrieved party, disclosed to it information sufficient to prepare a relevant application to court.

This information, established in particular by the NABU investigation, was not known to the Prosecutor General's Office of Ukraine and was not examined by the courts during the trial.

Ukrnafta reminds that according to the preliminary conclusions of the investigation, which are based on relevant expert studies, the state underpaid UAH 196 mln when it sold the special permit to Arkona Gas-Energiya without a tender. The real value of the special permit is also confirmed by the amount of the sale of corporate rights of Arkona Gas-Energia, which had been alienated by the previous owners to the British company Regal Petroleum plc (now Enwell Energy). The new owner paid USD 8.6 mln for the company with the only license in its portfolio.

We emphasise that it is the efficiency and timeliness of the actions of the Prosecutor General’s Office that the restoration of the violated state interests, as well as the achievement of justice in this legal case, depends on. The Office of the Prosecutor General is also able to join now the actions announced by the National Security Council and the President of Ukraine to restore the legality of issuing special permits for subsoil use.

Ukrnafta emphasizes  the fact that under the law, the Prosecutor General’s Office has 30 days to exercise its right to bring such an application to court. In view of the public interest around the Svystunkivsko-Chervonolutske field, Ukrnafta suggests that public anti-corruption organisations take control over this issue and see whether the Office of the Prosecutor General is willing to protect the public interest.

The company is ready to provide comments on this issue and, if necessary, guarantees methodological and legal assistance to the Prosecutor General's Office in the process of preparation of the application on reconsideration of the court decision under the newly discovered circumstances.

 

Background:

Ukrnafta held a special permit for geological study and pilot industrial development of the Svystunkivsko-Chervonolutske gas field from 2004 to 2014. Subsequently, the company did everything possible to prolong the special permit and intended to obtain a special permit for production as a subsoil user that had prepared the relevant field for commercial development. But the special permit was granted to Arkona Gas-Energy LLC, which the media link to the interests of the former President of Ukraine, without a public tender, for no price, and in violation of the procedures established by law. In 2017, Arkona Gaz-Energiya received a special permit for the Svystunkivsko-Chervonolutske field for the equivalent of USD 144,000, which is significantly lower than its market value. At the same time, the issued special permit understated the reserves of natural gas by at least 3 times compared to the reserves recorded by the State Commission of Ukraine for Mineral Reserves on the order of Ukrnafta.

A journalistic investigation by Radio Liberty found that the interests behind Arkona were those of people linked to Oleksiy Malovatsky, who was a lawyer for Petro Poroshenko during the 2014 presidential election and subsequently became a member of the High Council of Justice. During the trial of this case, facts of pressure on judges by O. Malovtskyy were recorded.