On the 19th of July, 2016, the Association of Gas Producers of Ukraine (AGPU) jointly with the American Chamber of Commerce in Ukraine (the Chamber) during the round table “The government plan 2020 for gas production – a myth or reality?” with the participating representatives of the authorities, MPs and the public, have started the public discussion of the gas production industry state and further steps en route to achieving the Government’s target goal of increasing gas production to 27 billion cubic meters by year of 2020.
During the discussion, the Chamber has presented the 3 main sets of issues, effective solving of which should improve the current state of the oil and gas industry and lead to international acknowledgement of Ukraine’s attractiveness for the oil and gas business. Among those issues are: carbohydrates production tax reform, implementation of the Law on the natural gas market, and regulatory reform. Regarding the latter, the Chamber has created an initiative group and started working on the new Subsoil Code text. The new Code should make the procedure of obtaining special permits transparent and eliminate the collisions with the existing legislature.
“The Chamber welcomes the Government’s initiative on increasing domestic gas production, as well as the work on improving the investing climate in Ukraine. At the same time, we encourage the Government and the Parliament to take into consideration all the mechanisms of effective reform of the oil and gas sector, which were proposed by us. Those mechanisms should turn Ukraine into a self-sufficient and competitive state with sufficient energy resources” – stated the President of the Chamber, Andriy Hunder.
The Association in turn has initiated the public discussion of the “Roadmap for the Oil and Gas Industry” project. In particular, three main strategic initiatives were highlighted. Implementation of these initiatives will improve the situation in the gas production industry and will allow to achieve the Government’s goal of increasing the gas production to 27 bcm by 2020. Those initiatives include tax policy, subsoil use regulations, and regulatory policy.
The tax policy initiative envisions reasoning for the royalty rate of 12 % now, and further shift in middle-term to a fiscal system based on income taxation. This average European tax level will allow to become competitive for the foreign investments. Such tax rate is acceptable for realization of new projects in Ukraine. Additionally, the Association advocates for royalty separation: 10 % should go to state budget, 2 % – directly to the local budgets. This is the milestone when negotiating with the local authorities regarding issuance of lands, approval of special permits, etc.
The subsoil use regulations initiative includes work in the following areas: reform the resources access system, simplify the issuance of lands, normalize of the wells status, deregulate of the licensing and conciliation prcedures, uprate and codification of the subsoil use legislature.
The regulatory policy initiative includes harmonization of the secondary gas market legislature, decrease of the natural gas safety stock, normalization of the export-import relations and protection of competition on the gas market.
Roman Opimakh, Chief Executive Director of the Association of Gas Producers in Ukraine: “Gas producing companies have confirmed their readiness to achieve the Government’s plan of increasing domestic production by 35 % by 2020. However, the government’s implementation of the prerequisites, which were presented today to the public as a roadmap, is crucial for achieving this ambitious goal. We are hoping for an open dialog and a quick implementation of reforms”.