On the way to the European integration, and by virtue of the determined Ukrainian policy towards energy independence, the Ukrainian Government is taking significant steps to improve Ukrainian energy sector. Currently, important changes are being introduced in the oil-and-gas industry. This has already encouraged global oil-and-gas companies such as ExxonMobil, Shell, Chevron, and Eni to commence investment activity in Ukraine.

Important Facts

  • In 2010 Ukraine joined the European Energy Community (EEC) established between the European Union (EU) and a number of Southeast European countries to deal with electricity, natural gas and petroleum products and it has been an effective member of the EEC since 1 February 2011.
  • This year, two tenders have already been held for the geological exploration and development of hydrocarbons on the basis of agreements on product distribution, with the winners announced:
    • Royal Dutch Shell will develop the Yuzivska Field in Kharkivska and Donetska regions; and
    • Chevron will work on the Oleska Field in Lvivska and Ivano-Frankivska regions.
  • Two more tenders for the geological exploration and development of hydrocarbons on the basis of agreements on product distribution have been announced and will be held in 2012. They relate to:
    • The Skifska Field on the Black Sea shelf; and
    • The Forosa Field on the Black Sea shelf.
  • One more tender for the geological exploration and development of hydrocarbons on the basis of agreements on product distribution in the Slobozhanska Field in Kharkivska region is expected to be announced in 2012.
  • In May 2012, the State Service for Geology and Mineral Resources of Ukraine and the British Geological Survey, which is the oldest geological survey in Europe, signed an agreement on cooperation in geological exploration and rational use of subsoil. The aim of the cooperation is to increase the level of mineral resources geological exploration and use in Ukraine. Complete transit from 2-D mapping to 3-D geological modeling is one of the key goals for the next decade.

Ukrainian legislation in the energy sector has been amended to provide better working conditions for investors and to establish more transparent and consistent rules. In May 2011, the Cabinet of Ministers of Ukraine adopted the Procedure for Granting Special Permits for Subsoil Use without limiting the validity period of the procedure, which is a new development. In the past the practice was to adopt the relevant procedures only for one year and often they were not enacted at the beginning of the year but only several months after the year began which caused many problems for subsoil users.

Other important amendments to the effective legislation are as follows:

  • Law of Ukraine 'On Principles of Functioning of the Natural Gas Market' was adopted on 8 July 2010. This was an important step toward harmonization of the legislation in the area as earlier relations in the field had been regulated in fragments. Adoption of the law will ensure a systemic approach to the creation of conditions for stable operation of the natural gas market and its further development and will bring Ukrainian legislation in line with the relevant EU laws. The major advantages of the law are that it implements three basic principles crucial in the EU law: 1) free choice of gas suppliers by customers, 2) free and equal access to gas transportation systems, 3) separation of gas transportation from its development and supply, as well as separation of gas distribution from its development, supply, storage and transportation
  • Implementing the provisions of the Law of Ukraine 'On Principles of Functioning of the Natural Gas Market', the National Commission for State Regulation in the Energy Sector adopted the Procedure for Access to the Unified Gas Transportation System of Ukraine in April 2012. The procedure aims to provide customers with transparent rules and equal access to the gas transportation system
  • A number of new laws have been enacted: Laws of Ukraine 'On Gas (Methane) of Coal Deposits' in 2009, 'On Peculiarities of Lease or Concession of State-Owned Objects of Fuel and Energy Complex' in 2011, 'On Peculiarities of Privatization of Coal Mining Enterprises' in 2012
  • Law of Ukraine 'On Agreements on Product Distribution' was amended in November 2011 before the announcement of the tenders for the development of hydrocarbons on the basis of agreements on product distribution in early 2012
  • Both agreements on product distribution and concessions are in the form of public-private partnership according to the relevant Law 'On Public-Private Partnership' adopted on 1 July 2010. This Law determines organizational and legal grounds for co-operation between the state and private partners and the basic principles of public private partnerships on a contractual basis

As an emerging market economy at the crossroads of Eastern Europe, Russia, Central Asia, and the Middle East, Ukraine offers great potential as for trade and investment. Given these trends, it is getting more and more attractive to invest in the Ukrainian energy sector.

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