5 Feb 2024 12:46

Ukraine's Smart Energy produces 50% less gas than planned in 2023 due to restrictions

MOSCOW. Feb 5 (Interfax) - Ukraine's Smart Energy, whose oil and gas division includes UK-based Enwell Energy plc and Ukrgazvydobutok, produced 150 million cubic meters of gas, 17,000 tonnes of condensate and 11,500 tonnes of LNG in 2023, Ukrainian media reported, citing a statement from Smart Holding.

"Due to the nontransparent criteria of the government's sanctions policy, three of the group's four companies have been forced to remain idle for more than nine months already. This led to the nonfulfillment of the production plan by almost 50%; 135 mcm of gas remained unproduced," the statement said.

Smart Energy mothballed Kharkov wells, which were forced to stay idle because special gas production permits were blocked, the company said. This made it possible to reduce the negative impact on their future productivity when operations resume.

Smart Energy acting CEO Alexei Zaits said in the press release that Ukraine's state budget had lost out on UAH1.35 billion in tax revenue as of January 1, 2024 due to the situation. "We hope that this year will bring positive and constructive decisions from the authorities and we will be able to operate at full strength," he said.

Smart Energy said it paid UAH1.8 billion in taxes and other payments to budgets at various levels in 2023.

Due to sanctions imposed against Smart Holding founder Vadim Novinsky, Ukraine's State Geological Survey suspended Ukrgazvydobutok's license to the Ostroverkhovskoye gas condensate field in April 2023 and Enwell Energy's licenses to the Vasischevskoye and Svistunkovsko-Chervonolutskoye gas condensate fields in May 2023.

Smart Holding founder Vadim Novinsky was hit by Ukrainian personal sanctions in early December 2022. The sanctions include a complete freeze on assets, ban on conducting trade operations and moving capital out of Ukraine, and the loss of all government awards and commendations.

In mid-January 2023, the group announced that Novinsky managed to transfer assets to Smart Trust and Step Trust in November 2022, shortly before the imposition of the sanctions.

Ukraine's Security Service searched the offices of Enwell Energy on April 10 in a criminal investigation into the circumstances of Smart Holding's reorganization. Ukraine's Justice Ministry subsequently restored Novinsky as the beneficiary in the registries of Smart Holding oil and gas companies, although the owners of the trusts said these actions were illegal.

Smart Holding's oil and gas assets are consolidated in Smart Energy, which includes Ukrgazvydobutok and Enwell Energy (formerly Regal Petroleum, with the Mekhedovsko-Golotvischenskoye, Sviridovskoye, Vasischevskoye and Svistunkovsko-Chervonolutskoye fields). Enwell Energy's Ukrainian assets include Regal Petroleum Corporation Limited, Prom-Energo Product LLC and Arkona Gas-Energy LLC.

The official exchange rate was UAH37.60/$1 on February 2.