Ukraine: Kinstellar Energy Digest Ukraine, January 2019 In Review

Last Updated: 8 February 2019
Article by Olena Kuchynska and Viktoriia Pysmenna

OIL & GAS: Second International Licencing Round to take place in May 2019

On 29 January 2019, Ukraine's State Geology and Subsoil Service (the "Derzhgeonadra") announced plans to hold the Second International Licensing Round of e-auctions for exploitation rights to seven onshore fields of hydrocarbons in the Chernihiv, Ivano-Frankivsk, Kharkiv, Lviv and Sumy regions.

The areas for which the Licences will be sold include:

  • Dobrenska Block:
  • Drohobytska Block:
  • Kadobnyanska Block:
  • Kaliuzhna 1 Block:
  • North Yefremivska Block:
  • Opolonivska 1 Block:
  • Opolonivska 2 Block:

An overview of the field licences for which to be auctioned can be downloaded here (available in English).

The auctions are expected to be held on 2 May 2019 using Ukraine's renowned public e-procurement system ProZorro. The winner of each auction will be awarded a 20-year Exploration, Pilot Production and Production Licence (an E&P Licence).

Applications to participate can be submitted within 90 days from the announcement of the e-auctions published on the official websites of the Derzhgeonadra and ProZorro, i.e. by 6 pm 1 May 2019. For an overview of the e-auction procedure, please see the October issue of the Kinstellar Energy Digest: Ukraine.

In December 2018, the Ukrainian government announced the sale of 30 natural gas blocks through e-auctions, ten of which have been offered at the First International Oil And Gas Licencing Round, which is scheduled for 6 March 2019 (information on the available blocks can be downloaded via this link). The Derzhgeonadra is currently working on the Third International Licencing Round.

OIL & GAS: New reduced tariffs for natural gas entry and exit points

New rules in effect from 1 January 2019 reduce the tariffs for the cross-border entry points to Ukraine's gas transmission system (the "GTS") by 50%, and the tariffs for domestic entry points by over 300%:

  • tariffs on entry to Ukraine's GTS – point at the border (VAT exclusive):
    • new tariff: USD 6.28 per 1,000 cubic meters per day;
    • old tariff: USD 12.47 per 1,000 cubic meters per day.
  • tariffs on entry to Ukraine's GTS – internal point (VAT exclusive):
    • new tariff: UAH 91.87 (approximately USD 3.3) per 1,000 cubic meters per day;
    • old tariff: UAH 296.8 (approximately USD 10) per 1,000 cubic meters per day.

The decrease of tariffs on entry to the GTS is expected to make Ukraine's underground gas storage system more attractive for the storage of natural gas for three-year periods. Gas producers are also expected to benefit from the reduced cost of entry to Ukraine's GTS, which shall boost the national gas production.

ELECTRICITY: Government seeks partner for Ukraine-EU Energy Bridge

Following an earlier statement from Ukraine's Ministry of Energy and the Coal Industry, the government has published in the official gazette an invitation to participate in a tender to establish a public-private partnership ("PPP") for the implementation of the "Ukraine-EU Energy Bridge" project (the "Energy Bridge").

The Energy Bridge is designed to enable the delivery of nuclear-generated electricity from unit 2 of Ukraine's Khmelnitsky nuclear power plant ("KhNPP") to Poland and possibly to other European states. The project to export electricity would require linking unit 2 at KhNPP with the European Network of Transmission System Operators ("ENTSO-E"). The government anticipates that long-term contracts made possible by the Energy Bridge will provide funds necessary to complete units 3 and 4 at KhNPP. The project for their construction is currently undergoing an environmental impact assessment.

According to the notice, the PPP will cover existing and functionally interrelated state-owned energy facilities under the operating control of the national operator of nuclear power plants, State Enterprise "Energoatom", and of the transmission system operator, State Enterprise "NEC Ukrenergo". The PPP will be entered into by Ukraine's Ministry of Energy and the Coal Industry for a term not exceeding 23 years and 3 months.

The objectives of the PPP include, among others, construction of a new transformer and:

  • partial reconstruction of the KhNPP (the power supply network for units 1 and 2 at KhNPP and a 750kV outdoor switchgear);
  • reconstruction of power lines to Rzeszów in Poland (750 kV OTL "KhNPP – Rzeszów") and to Albertirsa in Hungary (750 kV OTL "Zakhidnoukrainska – Albertirsa");
  • reconstruction of the power substation "Zakhidnoukrainska".

The deadline for application is 5:30 pm on the 45th day from the day following publication of the notice, i.e. 12 March 2019.

The notice in both the Ukrainian and English languages is available at the web-site of the Ministry of Energy and the Coal Industry of Ukraine; the tender documentation is available only in Ukrainian. Energoatom's presentation on the Energy Bridge can be accessed via this link (in English).

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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