Ukraine:
Ukraine To Hold 12 Tenders For Oil & Gas Production Sharing Agreements
18 January 2019
Redcliffe Partners
To print this article, all you need is to be registered or login on Mondaq.com.
On 18 December 2018 the Ukrainian Government approved carrying
out tenders for oil & gas production sharing agreements
("PSAs").
Pre-conditions
Ukraine's issuing PSA concessions is one of the key elements
in its strategy to become energy self-sufficient. It is also one of
the objectives which the EBRD indicated in its Ukraine Country
Strategy for 2018-2023.
Potential PSA Areas
The potential PSA areas vary from 286 km2 to
3,470 km2. All of the areas are onshore.
Key Terms of the PSAs
Some of the key terms of the PSAs are:
- the Cost Petroleum share will be no
more than 70% of total petroleum production;
- the State's share of Profit
Petroleum will be no less than 11%;
- the PSA term will be 50 years (unless
otherwise agreed);
- key industry-standard PSA protections
are available to investors, including:
- legal stability – no future
changes of law will apply to investors (other than legislative
changes relating to matters of defence, national security, public
order and environmental protection);
- fiscal stability – no tax
increases will apply to investors; and
- international arbitration – as
a dispute resolution mechanism.
The PSA is a contract to which Ukraine (as a country) is a
party.
Minimum Commitments
Annex 1 (PSA Fields) contains a description of
the fields, and the minimum investment and exploration obligations
in respect of each field.
What is needed to apply
In order to apply, bidders are required to:
- submit their completed tender bid;
and
- pay an application fee of
approximately USD10,500.
The tender documentation (including geological information) is
provided to bidders free of charge.
Timing
Annex 2 (PSA Application Timeline) contains the
timeline of the PSA application process.
Redcliffe Partners is one of the few law firms in Ukraine which
has extensive PSA negotiation experience, having represented
foreign investors on several large Ukrainian PSA projects in the
past.
ANNEX 1
PSA Fields
No |
Field |
Area (sq. km) |
Location (regions) |
Minimum Investment Obligation |
Minimum Exploration Requirements*
|
1 |
Rusanivska |
766.56 |
Sumy, Poltava |
UAH 800 million (appr. USD28.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
2 |
Zinkivska |
571.40 |
Sumy, Poltava |
UAH 500 million (appr. USD18 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
3 |
Grunivska |
1,108.36 |
Sumy, Poltava |
UAH 850 million (appr. USD30.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
4 |
Okhtyrska |
717.25 |
Sumy, Poltava, Kharkiv |
UAH 600 million (appr. USD21.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
5 |
Balakliyska |
1,119.25 |
Kharkiv |
UAH 800 million (appr. USD28.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
6 |
Ivanivska |
841.61 |
Kharkiv |
UAH 800 million (appr. USD28.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
7 |
Buzivska |
669.65 |
Kharkiv, Dnipropetrovsk |
UAH 600 million (appr. USD21.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
8 |
Sofiyivska |
2,715.95 |
Chernihiv, Sumy, Poltava |
UAH 1 billion (appr. USD36 million) |
Drilling of 3 exploratory wells and carrying out a 3D seismic
survey on an area of not less than 500 km2 |
9 |
Varvynska |
3,471.26 |
Poltava, Chernihiv |
UAH 1 billion (appr. USD36 million) |
Drilling of 3 exploratory wells and carrying out a 3D seismic
survey on an area of not less than 500 km2 |
10 |
Ichnianska |
2,447.65 |
Chernihiv |
UAH 1 billion (appr. USD36 million) |
Drilling of 3 exploratory wells and carrying out a 3D seismic
survey on an area of not less than 500 km2 |
11 |
Berestianska |
286.38 |
Lviv, Khmelnytsky |
UAH 450 million (appr. USD16 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
12 |
Ugnivska |
967.44 |
Lviv, Ivano-Frankivsk |
UAH 600 million (appr. USD21.5 million) |
Drilling of 2 exploratory wells and carrying out a 3D seismic
survey |
* Minimum exploration requirements for the first stage of
geological exploration (5 years).
ANNEX 2
PSA Application Timeline
No |
Action |
Term |
1 |
Approval of tender documentation and official announcements in
Ukrainian and foreign media |
Must be completed by 18 February 2019
|
2 |
Submission of applications |
within3 months after the official
announcement |
3 |
Determination of the successful applicants |
within1 month from the final date
applicable to bid submissions |
4 |
Conclusion of the PSAs |
within1 year from the publication of
the results of the tenders (can be extended by 6
months) |
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Energy and Natural Resources from Ukraine
UK To Withdraw From Energy Charter Treaty
Akin Gump Strauss Hauer & Feld LLP
On 22 February 2024, the UK announced it is withdrawing from the Energy Charter Treaty (ECT) on the basis that it is incompatible with the energy transition, being the 11th state to do so.
New Plans For Green Hydrogen In The UK
Marks & Clerk
In another exciting development for Hydrogen Week, Lhyfe have unveiled plans to construct a green hydrogen production plant in North Tyneside.
"Take Or Pay" In PPA In Kazakhstan: For Or Against?
Unicase Law Firm
"Take or pay" is a mid-twentieth-century mechanism for building contracts for the supply of goods. It was conceived of as a contractual structure in which the buyer had to purchase (take) the goods...