The partnership of Canadian Vermilion Energy Inc. and Ukrgazvydobuvannia in a joint project on development of three oil and gas fields in Ukraine under production sharing agreements (PSA) is now 50/50, according to its second quarter year report.
“Entering Ukraine aligns with our strategy to capitalize on opportunities in under-exploited basins by using modern technologies to improve success rates and recovery,” reads the document.
Vermilion said that subsequent to the end of the second quarter of 2019, it entered into a 50/50 partnership with Ukrgazvydobuvannia and were awarded two exploration licenses in Ukraine, subject to a final production sharing agreement.
“The licenses cover approximately 585,000 gross acres situated in one of Europe’s most prolific natural gas regions (Dniprovsko-Donetsky Basin). The new licenses are in close proximity to several multiTCF gas fields with most of the basin (and awarded license areas) still uncovered by 3D seismic. The terms of the licenses include a modest capital commitment, back-loaded over a five-year time frame,” reads the report posted on the company’s website.
As earlier reported, Canada’s Vermilion Energy jointly with a Ukrainian company (Ukrgazvydobuvannia) has won the right to develop three oil and gas fields in Ukraine.
On July 1, an interdepartmental commission for organizing the conclusion and implementation of the product sharing agreements (PSA) prepared for the government proposals on the winners in nine continental hydrocarbon sectors put up for auctions. Among them are Ukrgazvydobuvannia in alliance with Vermilion for Balakliyske and Ivanivske fields, Ukrgazvydobuvannia for Berestianske and Buzivske, private company Ukrnaftoburinnia for Rusanivske, U.S. Aspect Energy for Varvynske, DTEK for Zinkivske, Geo Alliance for Sofiyivske and Zakhidnadraservis for Uhnivske fields.
The head of the office of the National Investment Council, Yulia Kovaliv, said that now within two months companies must agree on the contracts themselves and sign agreements with the government in order to start exploration as soon as possible and to start work as soon as possible. She also said that the volume of investments of the winning companies is $430 million in the pessimistic scenario.
According to Vermilion report, its quarterly production volumes by approximately 1,300 boe/d and FFO by approximately $11 million, we recorded corporate production of approximately 103,000 boe/d, little changed from the previous quarter.
U.S.-based Trident Acquisitions Corp. has been recognized the winner of the tender for the development of the Dolphin hydrocarbon section on the Black Sea shelf on the basis of a production sharing agreement (PSA), company CEO and one of its shareholders Ilya Ponomarev has said. “It was a difficult struggle, but our application was significantly more profitable for Ukraine,” he said on Facebook.
Ex-State Duma deputy Ponomarev, to whom Petro Poroshenko granted Ukrainian citizenship in May of this year, thanked the government and personally Minister of Energy and Coal Industry Ihor Nasalyk for the trust. “We promise not to let you down and to do everything possible to start production as soon as possible!” he said.
As reported, on April 12, 2019, the Cabinet of Ministers announced a tender for the development of hydrocarbons within the Dolphin section on the Black Sea shelf under PSA terms. The term of the agreement is 50 years.
The American Chamber of Commerce in Ukraine is concerned about the introduction of the PSA (product sharing agreements) mechanism in addition to the license/royalty regime which continues to run in parallel.
The Chamber said that the criteria discriminating PSA and other blocks are unclear. The current PSA process is seriously flawed.
“PSAs are not used in any EU country, and their use in Ukraine only underlines the urgent need for reforms in the existing oil and gas fiscal and regulatory regime,” the Chamber said, adding that a single, fair, stable and non-discriminatory environment for oil and gas is one of the key factors in attracting major international investment.
The American Chamber of Commerce in Ukraine looks forward to working with the government and members of the international community to offer ways to address shortcomings in the current PSA process and to create an environment that sparks a resurgence of interest in the sector and allows Ukraine to achieve its objectives including self-sufficiency in gas.