By LUGANO. May 12 (Interfax-Ukraine) – Russia’s war against Ukraine has led to the suspension of almost all production sharing agreements (PSAs) signed in the oil and gas industry, as investors took advantage of the force majeure rule, Deputy Energy Minister of Ukraine Farid Safarov said at the Ukrainian-Swiss Lugano Business Forum on Friday.
“Unfortunately, work on implementing production sharing agreements has been suspended. Today, one company, WELL CO LLC, is mining under a production sharing agreement, since this area [Uhnivska site, Ivano-Frankivsk region] is within the minimum risk range,” he said.
Safarov said that in other cases, it is about oil and gas sites in Kharkiv, Sumy, Poltava, and Chernihiv regions located on the territories close to hostilities.
In general, the deputy minister said the war had a negative impact on the oil and gas industry. In particular, it led to a forced shutdown in a number of fields, especially in the first months. “Most of the gas-producing companies, especially private ones, did not invest in existing and new projects,” the deputy minister said, pointing to another of the consequences of the hostilities.
At the same time, Safarov said that due to the de-occupation of the territory by the Armed Forces of Ukraine, approximately from July 2023, the decline in natural gas production began to increase and reached 18.5 billion cubic meters at the end of the year, which is 6.7% less than in the pre-war 2021.
The deputy minister said that the government of Ukraine has taken several decisions to support gas-producing enterprises and reduce the country’s dependence on imported natural gas. Thus, in particular, a differentiated royalty for the use of subsoil was introduced and guarantees were extended regarding its revision.
According to him, another important step is the actual admission of companies with state-owned shares to the exchange sale of crude oil and gas condensate, as well as liquefied gas, which will allow for establishing market pricing and attracting investors.
To maintain and increase hydrocarbon production the state needs to make a number of difficult and complex decisions, Safarov said. “It is necessary to create attractive fiscal conditions, in particular, for deposits of unconventional hydrocarbons. And we are working to continue deregulating the oil and gas industry,” the deputy minister said.
