The Association of Gas Producers of Ukraine is pointing out to the Cabinet of Ministers, MPs, and the public that the amendments to Decree №615 "On approval of the order of issue of special permits for subsoil use" from 30.05.2011, which were passed yesterday, contradict the ambitious plans of the Government to increase domestic production. It also mostly cancels out the recent positive steps on attracting new investments in the industry and achieving energy independence of the country.
The proposed by the Ministry of Ecology and Natural Resources of Ukraine version of amendments definitely does not correspond to the solutions, which were developed as a result of a seires of approval hearings with the participation of subsoil users from various areas of the economy.
It is worth mentioning that the version that was passed by the Government includes:
implementation of the "payment for incremented reserves" and maintenance of the illegal payment for extending the special permit term. This contradicts the current articles of the Subsoil Code and Ukraine's international obligations under the Association Agreement (Directive 94/22/EC), which includes an exhaustive list of payments within the special permit (issue fee and royalties);
maintenance of the "aprobation" mechanism – it will still be possible to receive the license without the auction for new oil and gas fields based on the processed geological information. Currently, "aprobation" is the last critically not transparent and uncompetitive means of obtaining the license, which is usually exploited by the unscrupulous market players. Existence of such a means indicates the ongoing double standards policy, which discriminates the organization of open and transparent auctions, which are the founding block in the foundation of the further development of the industry;
holding the environmental impact assesment (EIA) to receive the special permit for geological development of oil and gas. This point contradicts the philosophy of the law "on environmental impact assessment", which clearly states that EIA is only performed during the extraction of the minerals.
The Association of Gas Producers of Ukraine is stressing out that no new burdening payments shall be introduced. In addition, these norms are outside of the current Ukrainian legislation and do not have any equivalents in the progressive world. Instead, the Government should focus all of its efforts on organizing enough open auctions for petroleum fields, which were not held for more than a year and a half. The international experience indicates that payments of the special resource royalties and fees for the new auctioned licenses is the sole transparent and effective mechanism of filling the national budget. We stress out that the passed version of the amendments to Decree 615, proposed by the Minitry of Ecology will highly negatively impact the industry and will not facilitate the establishment of gas independence in Ukraine.
We remind that as of 2017, the petroleum industry has paid almost 75 billion UAH of taxes, which is approximately 10% of all the budget revenues. This year the budget includes revenues of 0.6 billion UAH for the issue of special permits for subsoil use. According to our assessment, this amount can be significantly increased by holding open auctions and biddings for new fields.