Page 10 - FSUOGM Week 24 2019

FSUOGM POLICY FSUOGM
Ukraine collects bids for offshore block
UKRAINE
UKRAINE is holding its rst post-revolution licensing contest, with authorities receiving bids from four companies for exploration rights to a 9,500 square km area in the Black Sea.
e Ukrainian Cabinet launched an auc- tion on April 12, inviting o ers for a 50-year production-sharing agreement (PSA) for the Dolphin contract area on the northwest section of Ukraine’s Black Sea shelf. e win- ner will be required to spend 1.5bn hryvnia ($55.5mn) during an initial exploration phase, which will involve the drilling of at least ve wells.
According to the Association of Gas Pro- ducers of Ukraine (AGPU) – a lobby group for the country’s oil and gas industry – one o er for the contract was led by Caspian Drilling Co. (CDC), a subsidiary of Azerbaijan’s national oil company SOCAR. A second came from Ukr- na oburinnaya (UNB), Ukraine’s largest private gas producer, while a third was submitted by US special purpose acquisition company (SPAC) Trident Acquisition and San Leon Energy, an independent explorer focused on Europe and North Africa.
The remaining bid was made by Frontera Resources, a Texas-based company operating in Georgia and Moldova. Frontera is considered a favourite to win the tender, which it proposed to be held earlier this year.
ere are doubts about the company’s capa- bility as an operator, however. It has been una- ble to start commercial production at its South Kahketi gas complex in Georgia despite having worked there for more than two decades and
claiming to have found several trillion cubic metres of gas.
It entered a 50-year deal to search for oil and gas in southern Moldova in 2017, pledging to invest US$500mn. But the company has not reported conducting any activity in the country since then.
Ukraine’s energy ministry has warned it could repeat the tender for Dolphin if a suita- ble candidate is not found to develop the block. Meanwhile the chief of sta of President Volo- dymyr Zelenskiy, Andriy Bohdan, led a letter earlier this month urging the cabinet to extend the 60-day contest for another 120 days, arguing that more time was needed for such a “large- scale project.”
e AGPU also believes the auction has been conducted too hastily.
“ e association addressed the government in March to delay the tender and prolong the preparation period up to four months,” AGPU Director Roman Opimakh told FSU OGM. “ at would have allowed increased competition and brought international players with proper competencies in Ukraine.”
Under the PSA terms, if the selected opera- tor makes a discovery it will receive 70% of pro- duction revenues until it has recovered its costs, while the Ukrainian state will secure a share of at least 11% of pro t oil. e royalty tax rate on liq- uids production for PSAs is 2% in Ukraine, while the rate for gas extraction is 1.25%. PSA holders are also subject to corporate income tax, VAT, personal income tax and uni ed social contri- butions (USCs).™
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w w w . N E W S B A S E . c o m Week 24 19•June•2019