Business news from Ukraine

On March 11, 2024, according to the previously announced schedule, the process of accepting applications from potential partners for joint development of 21 fields was completed.

The company is currently finalizing the terms of cooperation with the companies that submitted the best proposals, preparing to submit joint applications to the Interdepartmental Commission for the organization of the conclusion and implementation of production sharing agreements and subsequent approval of the final terms of the production sharing agreements by the Cabinet of Ministers of Ukraine.

However, due to the interest of investors who were unable to participate in the first selection and the availability of fields with the potential for joint development, the Company decided to extend the application deadline for some fields by 3 months until September 10, 2024.

For more details on the algorithm for submitting applications and selecting potential investors, please follow the link.

PJSC Ukrnafta has received applications from six companies for joint development of 15 fields out of 21 offered for investment in 2023, said Denys Kudin, Executive Vice President for Corporate Strategy and Development.

“We have received applications from 6 companies for 15 fields. No one applied for 6 fields, for some fields only one application was received, for others there were two applications, so we have to hold a certain internal competition,” he said during a speech at the IV Energy Law Conference in Kyiv on Friday.

According to him, the largest offer for investment in one field is $100 million, and the smallest is $7 million. Regarding the latter, he clarified that it was the best offer for the smallest field.

“As of this moment, the process (of attracting investors to joint field development – EP) is ongoing. We have passed the stage of accepting and evaluating proposals, finalized the commercial terms as seen by potential investors. The next step is the approval of these terms by our Supervisory Board, review by the interdepartmental commission under the Ministry of Energy, and then approval by the Cabinet of Ministers. This is the process, and we hope to complete it by the end of the calendar year,” said Kudin.

He said that Ukrnafta has proactively approached about 200 companies in the process of looking for investors and has also held talks with a number of companies at industry conferences. Out of this number of potential investors, more than 50 responded, and of these, 35 companies passed the due diligence process and were admitted to the Virtual Data Room with detailed information about the fields.

Kudin added that “the companies submitted proposals on average 1.5 times better than we had developed on our own, having formed their own vision of this five-year initial program.”

Describing the process of finding investors, Kudin noted that the company ranked them by country – in Canada, America, the UK, and the EU – and applied proactively, as well as advertising in the media, on the website, and at all possible industry events.

Regarding the selection of 21 fields, the company’s vice president noted that according to the criteria of the law on production sharing agreements (PSAs), “these are the worst, most difficult to produce, most depleted fields (out of 89 fields of Ukrnafta – EP) that require the use of high-cost, state-of-the-art technologies.” To assess them, 80 years of data were digitized.

Kudin pointed out that despite the war, foreign companies are ready to work in Ukraine and, in particular, to engage in production.

“We are not talking about top public companies where supervisory boards make decisions. For the most part, these are medium-sized private companies with a specific family of owners who continue to manage their business and risk their own money. They are ready to invest $50-60-100 million,” he said, adding that investors are encouraged by the possibility of resolving disputes under English law when concluding PSAs.

In general, he believes that about $10-15 billion should be invested in oil production over the next 10 years to reach annual production of 10 million tons, which would ensure Ukraine’s energy independence in this area.

As reported, at the end of 2023, Ukrnafta informed that 25 companies, including Ukrainian and companies from seven countries in Europe and North America, have already expressed interest in cooperation in the tender for the joint development of 21 fields (applications were accepted until March 1, 2024).

According to the company, the 2P category reserves, i.e. proven and probable reserves of the fields to which Ukrnafta offers access to potential partners, amount to over 12 million tons of oil and over 31 billion cubic meters of gas.

“In 2023, Ukrnafta increased oil and condensate production by 3% (by 39.9 thousand tons) compared to 2022, to 1.4 million tons. Last year, Ukrnafta produced 1.097 bcm of natural and associated petroleum gas, which is 5.8% (60.4 mcm) more than in 2022.

“Ukrnafta is the largest oil producer in Ukraine and the operator of the national network of filling stations. In March 2024, the company took over the management of Glusco assets and operates 545 filling stations – 460 owned and 85 managed. The company is implementing a comprehensive program to restore operations and update the format of its filling stations. Since February 2023, Ukrnafta has been issuing its own fuel coupons and NAFTAKarta cards, which are sold to legal entities and individuals through Ukrnafta-Postach LLC. Ukrnafta’s largest shareholder is Naftogaz of Ukraine with a 50%+1 share. In November 2022, the Supreme Commander-in-Chief of the Armed Forces of Ukraine decided to transfer to the state a share of corporate rights of the company, which belonged to private owners and is currently managed by the Ministry of Defense.

PJSC Ukrnafta has started drilling a new exploration well in western Ukraine, the company’s director Sergiy Koretsky said on Facebook on Friday.
“The design depth is 2754 meters. It is planned that the new well will reveal productive layers of menilite deposits,” he wrote.
The company is performing the work with its own rig, the Ukrnafta Drilling business unit.
The initial production rate is expected to be 16 tons per day.
As the head of the company reminded, Ukrnafta is also preparing to build two oil wells in the east of the country, which will produce more than 100 tons of oil per day. Both have design depths of about 4.5 km.
As reported, in 2023, Ukrnafta increased oil and condensate production by 3% (by 39.9 thousand tons) compared to 2022 – up to 1 million 409.9 thousand tons, gas production by 5.8% (by 60.4 million cubic meters), up to 1 billion 97.4 million cubic meters.
The company’s strategic goal is to double oil and natural gas production to 3 million tons and 2 billion cubic meters by 2027, respectively.
“Ukrnafta is the largest oil producer in Ukraine and the operator of the national network of filling stations. In March 2024, the company started managing Glusco’s assets and operates a total of 545 filling stations – 460 owned and 85 managed.
The company is implementing a comprehensive program to restore operations and update the format of its filling stations. Since February 2023, Ukrnafta has been issuing its own fuel coupons and NAFTAKarta cards, which are sold to legal entities and individuals through Ukrnafta-Postach LLC.
Ukrnafta’s largest shareholder is Naftogaz of Ukraine with a 50%+1 share. In November 2022, the Supreme Commander-in-Chief of the Armed Forces of Ukraine decided to transfer to the state a share of corporate rights of the company, which belonged to private owners and is currently managed by the Ministry of Defense.