Page 4 - FSUOGM Week 49 2019

FSUOGM COMMENTARY FSUOGM
Ukraine pushes on with investment drive
Despite modest results from its licensing rounds, Ukraine is moving in the right direction to achieve energy independence
UKRAINE
WHAT:
Ukraine will present three more production contracts to investors in London on December 11.
WHY:
The country has held a series of licensing contests over the past year, generating only lukewarm interest.
WHAT NEXT:
Ukraine must stay the course and continue taking steps to increase investment in its gas industry.
UKRAINE has held a series of licensing rounds over the past year in an effort to revitalise oil and gas exploration following record-low investment in the years following its 2014 revolution.
The success of these contests has been mixed. They have generally been well received by the industry and hailed as both competitive and transparent, serving as a good model for future rounds. On the other hand, they generated only lukewarm interest. Undeterred, Ukraine is about to present investors with a further three sites for exploration, due to go under the block next year.
Modest results
In the first round, completed in March, authori- ties only received bids for three of the ten licence areas on offer. There were also no foreign partic- ipants, with the awards going to Burisma Group and DTEK, two well-established local produc- ers, and state-owned gas firm UkrGasVydobu- vannya (UGV). On the upside, the bidding that
did take place was competitive, with the winning offers collectively amounting to UAH141mn ($6mn), or more than three times the initial ask- ing prices.
The second round, concluded in May, per- formed better, with bids received for six of the seven licences on show. But five of them went to UGV, while the sixth was given to a small local firm called Yedyna Oil & Gas. Likewise, the third round in June resulted in seven of the nine licences being awarded, but all to UGV. And in the fourth stage in June, UGV secured one of three licences on offer, with the other two attracting no interest.
The main draw in Ukraine’s licensing drive was the offer of nine production-sharing agree- ments (PSAs) – a contract type favoured by international oil companies (IOCs). But again, local players dominated the bidding process. Of the nine PSAs issued, six went to UGV and other local companies. UGV partnered with
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w w w . N E W S B A S E . c o m Week 49 11•December•2019