Ukraine: Ukraine To Hold 12 Tenders For Oil & Gas Production Sharing Agreements

Last Updated: 18 January 2019
Article by Redcliffe Partners

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.

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