Number of oil and gas PSAs in effect in Ukraine drops to one - Energy Ministry

MOSCOW. May 15 (Interfax) - The crisis in Ukraine has resulted in suspending almost all of the production sharing agreements (PSAs) concluded in the oil and gas sector, as investors have taken advantage of the force majeure rule, Ukrainian media cited Ukrainian Deputy Energy Minister Farid Safarov as saying at the Ukrainian-Swiss business forum in Lugano last Friday.

"Unfortunately, work on implementing the production sharing agreements has been suspended. As of today, one company, Vell Co LLC, is producing under the production sharing agreement, as this area [Ugnevsky block, Ivano-Frankovsk region] is within the minimum risk," he said.

The other cases are oil and gas blocks in the Kharkov, Sumy, Poltava and Chernigov regions, Safarov said.

In general, the deputy energy minister noted that the crisis had an adverse effect on the oil and gas industry, in particular, this resulted in a forced halt at a number of fields, especially in the first months. "Most of the gas producing companies, especially private ones, did not invest in the current and new projects," the deputy minister said.

At the same time, Safarov noted that since July 2022, the fall of natural gas production began to accelerate and reached 18.5 billion cubic meters by the end of the year, which is 6.7% less than in 2021.

The deputy minister noted that the Ukrainian government had made a number of decisions to support the gas producing companies and lower the country's dependence on imported natural gas. Thus, in particular, a differentiated rent for the use of natural resources has been introduced and the guarantees of its revision have been expanded.

Another important step is the actual admission of the companies with the state stake to the exchange sale of crude oil and gas condensate, as well as liquefied gas, which will allow for determining the market pricing and attracting investors, he said.

In order to maintain and increase the hydrocarbon production, the state authorities need to make a number of other difficult and complex decisions, Safarov said. "It is necessary to create attractive fiscal conditions, particularly for the deposits of unconventional hydrocarbons. And we are working to pursue the deregulation of the oil and gas industry," the deputy minister said.

As reported, in late 2020, Ukraine signed the PSAs on the Sofievsky, Ugnevsky, Balakleysky, Ivanovsky, Zinkovsky, Buzivsky and Berestyansky hydrocarbon blocks. In particular, these are the PSAs with the state-owned Ukrgasvydobuvannya for the Berestyansky, Buzovsky, Balakleysky and Ivanovsky blocks, Rinat Akhmetov's DTEK for the Zinkovsky block, Viktor Pinchuk's Geo Alliance for the Sofiyevsky block, and Zinovy Kozitsky's VELL CO for the Ugnevsky block.

In November 2021, Ukraine signed another PSA with EP Ukraine B.V. (founders are Czech Republic's EP Power Europe and Slovakia's NAFTA) within the Grunevsky and Akhtyrsky hydrocarbon blocks for 50 years.