PRESS RELEASES

Last week, on 12-13 June, Kyiv hosted the II Investment Forum, a platform to discuss investment opportunities and challenges on the path to European integration and economic recovery in Ukraine. Yuliia Borzhemska, Regulatory Policy Manager at DTEK Oil&Gas, took part in the event. During the panel discussion on the US-Ukraine Mineral Resources Agreement, the speaker outlined the business's expectations from the upcoming legislative changes.

According to DTEK Oil&Gas, the existence of such agreement already strengthens the confidence of foreign investors in protection of their rights in Ukraine. Therefore, the Agreement creates preconditions for arrival of not only US investors but also European ones, and for a revival of interest of Ukrainian companies to invest into the exploration and development of the mineral resources.

Yuliia Borzhemska said, it is highly important to maintain a competitive environment through preservation of equal rights for all investors operating in Ukraine. The government is expected to ensure favourable regulatory conditions for them all:

• repatriation of dividends and a free conduct of foreign exchange transactions
• stability of the regulatory environment, especially the fiscal policy
• an open hydrocarbon market
• application of international standards for reserves assessment and field development
• use of international forms of contracts.

In addition, the government could attract even more investors and boost hydrocarbons production if it introduces incentive royalty rates for hard-to-recover resources, such as tight reservoirs, shale gas, depleted and low-production wells. Other important changes are establishment of an incentive oil and condensate royalty at the level of the natural gas one, cancelation of the 70%-royalty for gas produced under joint venture agreements - this mechanism should be restarted, and ensuring a timely access to land plots.

The Agreement does not limit the operation of Ukrainian companies, but everything will depend on its implementation. In particular, the Agreement sets requirements for certain subsoil users: priority of the Partnership to buy products, or provision of funds if the subsoil user raises capital for the project, etc.

"The mechanism should be implemented on a transparent market basis, where all market participants will be able to offer their terms and conditions and, taking into account the priority of the Partnership, let the best offer win. Similarly, an access to subsoil should be provided in transparent and competitive manner," the expert believes.

Development of the Mineral Resource Base

In the panel discussion on the implementation of the National Program for the Development of the Mineral Resource Base until 2030, the expert noted that international reserve classifications, such as PRMS, UNFC CRISCO, have been implemented in Ukraine, but for their practical use in the assessment of reserves by the State Commission of Ukraine for Mineral Resources, amendments to CMU Resolution No. 432 dd. 1997, are needed.

"The application of international standards will make the Ukrainian market more open and allow us to speak a common language with the foreign investors. A clear regulatory environment means lower risks, cheaper lending, insurance etc," said Yulia Borzhemska.

The Issue of ‘Dormant’ Licences

The speaker also commented on the issue of returning ‘dormant’ permits to the state. In her opinion, the actual legislation already provides a sufficient mechanism to monitor the fulfilment of license obligations, including work programs. Therefore, it is worth focusing on the monitoring instead of using the popular concept of ‘dormant’ licenses, especially given the exploration period, which can last up to 10 years.