The first step is to eliminate inactive oil and gas extraction licenses. The Ukrainian authorities have recently done a lot to change the regulatory and investment environment in the field of gas extraction: a special stabilisation clause has been drawn up for the period from 1 January 2018 to 1 January 2023 to set attractive rents, the tax system has been improved and the authorisation system simplified. The proposed distribution of production will be attractive to the state These measures will create transparent conditions for foreign investors, oil and gas fields will be used more efficiently, corruption factors in obtaining special permits will be eliminated, the environmental impact will be assessed according to international standards, and the volumes of oil and gas production in Ukraine will increase significantly. Given that exploration and production activities require significant capital investment and advanced equipment and technology, one of the main challenges is the ability to attract foreign investors. Although PPE can be completed for the exploration and production of any mineral resource, it is primarily suitable for the exploration and production of hydrocarbons. Under a production-sharing agreement, one party, Ukraine (the State), the other party, appoints the investor, with the research, exploration and exploitation of mineral resources in certain underground surfaces and the execution of the work related to the contract for a specified period, while the investor undertakes to carry out the transferred work at its own expense and risk. with an additional indemnity and receipt of payment (remuneration) in the form of part of the production profit. Such a definition of production sharing agreements is provided for in the Law of Ukraine on Production Sharing Agreements (PSA Law). The PSA law was already adopted by Parliament in 1999, but it has been little used by the state and investors. So far, only four PPE have been completed for natural gas projects in Ukraine, and hydrocarbon production in underground areas has never started.
Vanco, Exxon Mobile and Eni lost projects due to the annexation of Crimea, Shell withdrew from a project due to the military conflict in eastern Ukraine, while Chevron decided to withdraw for other reasons. In recent years, Ukraine has made considerable progress in implementing its ambitious economic reform agenda. After a sharp contraction of the Ukrainian economy in 2014-2015, the first signs of improvement were visible in 2016 and 2017. Energy independence is a priority for the government and can be achieved through domestic gas production to reduce its dependence on natural gas imports. Following the resolutions of the Cabinet of Ministers of Ukraine of 18 December 2018 on the implementation of 12 agreements for sharing oil and gas production (the PSA) (for more information in our newsletter), the Ukrainian Ministry of Energy and Coal Industry (the “Ministry”) published announcements regarding the introduction of nine PSA tenders. The PSA tenders launched this year are seen by experts as an important development to increase Ukrainian natural gas production, gain energy independence and attract investment in the sector. Such measures by the government were long overdue. As one of the forms of cooperation in the oil and gas industry, PPE has attracted at least two international players.
Namely Vermilion Energy of Canada (in consortium with the Ukrainian UGV) and the American Aspect Energy. . . .