Trouble has come - it pours

Government saves "Naftogaz Ukrainy" private cost of gas production.
 
Economic and political collapse of the extremely complicated operation of companies that are engaged in the production and implementation of such a valuable resource as gas. However, the Ukrainian government has decided to add to their already savory life a contribution by adopting a resolution on November 7 №596, who are obliged to industrial, energy and heat generating companies go for the purchase of natural gas exclusively from "Naftogaz of Ukraine".
 
Not surprisingly, the leading gas companies of the country appealed to the President and the Prime Minister with a request not to enact a decree №596. Entrepreneurs are confident that the Government's decision violates the international obligations of Ukraine in the energy sector and is contrary to the basic provisions of the European Energy Community, which member is Ukraine.
 
"We would like to draw your attention and express deep concern regarding the adoption of regulations and the adverse effects that may cause the actual performance of the decision in the context of energy security, investment climate, investment in the energy sector, further cooperation with the IMF, World Bank and European partners" - said in a letter to the heads of state companies.
 
In addition, this document, the Company believes is unlawful interference with the Cabinet of Ministers of Ukraine in the economic relations of market participants and natural gas contradict Ukrainian legislation and international treaties.
 
Thus, the introduction of standards violates the fundamental principles of the natural gas market, certain art. 9, 19, 20 and 22 of the Law of Ukraine "On the basis of functioning of the natural gas market." Namely - the free choice of natural gas suppliers, free trade in natural gas, ensuring equal opportunities for access to the Single Ukrainian gas transportation system, free choice of the seller of natural gas resources and obtaining services for transportation of natural gas trunk pipelines, gas distribution networks, services for injection, selection, storage in underground gas storages under the terms of the concluded agreements and legislation. And fair competition between market participants in the conditions of natural gas equal rights and opportunities and to avoid actions aimed at causing harm to other market participants to natural gas.
 
These and other relevant topics the author has discussed with the President of the Association "Ukrainian Subsoil users" Roman sentry.
 
Tell us about the Association of Ukrainian subsoil users: which of its main goals and objectives, whom she had in common?
 
Association "Ukrainian Subsoil users' work since 2009. Virtually the entire sector subsoil, and indeed the majority of mining companies in Ukraine remained a long time in public. But we must understand that the use of mineral resources is one of the key industries that form the state budget and GDP, so the industry subsoil for the state strategy and requires effective mechanisms of modern governance, transparency and stability of public-private partnership. A significant part of the problems associated subsurface with rapid changes of socio-economic conditions in Ukraine and in the world, and this requires a dynamic improvement principles of investors and mining companies in Ukraine by changing the laws regulating the industry subsoil. This is the scale issue that operates Association, combining both mining companies and establishing partnerships with representatives of relevant non-governmental and international organizations, lawyers, representatives of the media to create the most open public dialogue between the industry and the state.
 
As currently Association can help the state closer to energy independence. What, in your opinion, need to do and at what levels?
 
In the mining industry priority really takes energy, as Ukraine imports a significant amount of energy and import price is high. In the first 9 months of 2014 in Ukraine all mined 15.43 billion. Cubic meters of gas. While distribution was 28.93 billion. M3, of which the amount for the needs of industry amounted to 10.76 billion. M3, population, budget organizations, heat-generating enterprises and TAP gas distribution companies - only 16.01 billion. M3. The figures show that just under 50% of the required resource is imported and the rest - Ukrainian production. The share of imports is too high for the weak at dan stage of the Ukrainian economy and its need to replace their own resources. In 2014, total production may be slightly lower than in 2013 due to the situation in the east, but even in these difficult economic conditions, the company keep production levels. It is important to increase domestic resource potential and this will strengthen our energy not only, but also to national security. In October, the Association "Subsoil users Ukraine" became part of the multilateral working group for the development, implementation and monitoring of the effectiveness of the reforms, according to the obligations under the Energy Community. The Working Group was established in accordance with the Order of the Ministry of Energy and Mines number 766 of 28 October 2014 with a view to the proper implementation of para. 29 of the Cabinet of Ministers of Ukraine of 17.09.2014 № 864 "On Amendments to the plan of action to implement the obligations under the Treaty establishing the Energy Community. " According to the commitments, Ukraine should actively pursue the reform of the energy sector in accordance with the principles of liberalization, non-discrimination and transparency. It is also necessary to develop a system of taxation diferintsiirovannuyu industry and stabilize it so that investors can form a long-term program based on stable rules of the game, understandable level of rent payments tomorrow. In addition, the Association supports the initiative of EITI implementation of international standards as a way to increase the investment attractiveness of Ukraine. Including the extraction of hydrocarbons.
 
How and to what extent affects the tax increase on the subsoil to build and maintain the existing level of raw materials produced by different companies (in particular natural gas production for the needs of the population). (Bill №4309a). How do you feel about a government initiative?
 
In mid-2014 in the tax system subsoil of Ukraine has changed: ASU has adopted amendments to the Tax Code, resulting in increased rates twice as rent payments for oil, gas and condensate. Increasing rents, the state has decided a number of short-term problems, enlisting the mutual understanding on the part of oil and gas complex. For owners of deposits with high profitability of production such changes do not become excessive financial burden, but for subsoil users, who work hard and to new fields, increased rates reduced the economic component of hydrocarbon production projects in Ukraine. But this measure is used as a temporary and in the long term fiscal policy with the mineral resources should be reviewed. It should be the most stable and economically viable for obechpecheniya investment attractiveness of the industry.
 
What exactly is the problem often encountered in the activities of the Association? What are the difficulties in the work experience of the company, members of the Association? What is the reason? As you can see options to address these problems?
 
One of the recent problems faced by mining companies - is the adoption of the CMU Resolution number 596 and 599, the rules which actually deprived of private gas company the opportunity to sell the extracted raw materials on the open market. But contracts have been signed, the balance is formed in November, the company has the obligation to deliver. If the Resolution is canceled companies threaten to damage, and the private sector production may stop altogether. Taking such a decision the government was not interested in the views of companies in the industry, and notified them by publication on the website. In addition, Decree contradict the current legislation of Ukraine. This practice needs to be changed. And an important issue today - is an urgent need to reform overnight with procrastination on the part of the state. Ukraine has one feature: take one step on the path of reform, and the next day go back to the old models of work. We hope that the specialized state bodies will be more open to dialogue and this will give an opportunity to develop a professional modern concept of development of the sphere of subsoil use in the interests of the state and investors, international practices and trends in world commodity markets. In fact on the agenda - the adoption of a new Code on mineral resources as a single codified document, the implementation of standard EITI. Currently we are working on amending the procedure for issuing special permits for subsoil use, and we appreciate the desire to make the process Gosgeosluzhby open public hearings. This makes it possible to subsoil users convey their point of view and develop a balanced document. And the better will develop a public dialogue between the state and subsoil users, the more effective will be to turn out the steps for the development of the industry.
 
Describe the investment climate in Ukraine in the sphere of subsoil use today. How to attract foreign investment in this area?
 
Over the years, interest in Ukrainian deposits known international mining companies such as Shell, Chevron, Eni and others. But today's investor sentiment is difficult to assess positively. Firstly, it does not contribute to the socio-political situation. Secondly, we need guarantees from the Ukraine to the stability and transparency of the industry: often change norms of regulations, manually make changes to the fiscal policy of the state in relation to the mining companies, the low level of awareness of both the companies and the public areas, where it is planned geological work, leading to delays in the implementation of investment programs. The result is uncertainty in business and delay the timing of development projects. But Ukraine is interested in the arrival of investors in the sector, where the budget does not even have to carry out geological work in sufficient volume. And investors in turn needs stability and transparency. Improve the investment climate in Ukraine can implement international standards reporting EITI, a candidate country which Ukraine was last year, and in October of the following according to their commitments must submit the first report. After implementation of EITI is aimed primarily at creating conditions for a more open dialogue between business entities engaged in activities in the field of mining, and power.
 
Ukraine for a year was granted the status of candidate country Extractive Industries Transparency Initiative (Extractive Industries Transparency Initiative, EITI). According to the decision of the Board Initiative, Ukraine should implement the necessary reforms in the subsoil and publish its first report on the implementation of EITI to 17/10/15, the main emphasis in the implementation of the EITI is made to increase the transparency of payments, particularly in the oil and gas sector, which is the most important component of income the state budget and significantly affects the formation of the deficit in public finances. What exactly has been done in this direction? What results it gave?
 
Ukraine has a year to go to the world standards of the mining industry. In October 2015, Ukraine should provide the first report, so it is important to move from public statements to action. Until July 2015 all 28 EU member states will be required to enter zakonodavstvo to disclose payments to mining companies. Ukraine took the European course of development and has indicated its intention to implement Transparency Initiative Extractive otrasley̆ (EITI), and now we must make an effort to meet the international requirements. For the early implementation of the EITI principles in Ukraine must first provide a qualitative change legislation that will improve management practices in the extractive industries, and investment climate in the country as a whole as a result of projects related to mining. Tip: Only the oil and gas sector of the country in terms of production is controlled 129 laws and other documents. Thus, on the one hand, there is the problem of improvement of legislation, on the basis of which the authorized supervisory and regulatory authorities in the mining industry, as well as agreement on basic legal terms of European and Ukrainian legislation. On the other hand, the bureaucratic system inhibits the adoption of the basic document of the industry, namely, the new edition of the Code on mineral resources, which could integrate all the subsoil use legislation and to ensure the implementation of European standards, transparent and understandable.
 
In what industry needs reform? How Come? What are your suggestions?
 
Ukraine needs to develop the mineral resources base. But for this it will need to attract significant investment. On the threshold of the reforms we have extensive international experience of many countries, particularly the EU, and we can apply the best experience here in Ukraine. I think now is the time for promising reforms.
 
Science and Technology Center "Psyche" has prepared a forecast of world oil prices. How do you see the development of fossil fuel production in Ukraine with a decrease in oil prices to $ 60, $ 30 and $ 10 / barrel? What should the government will do to save the oil and gas industry in the implementation of these price scenarios?
 
I think it would be correct to finally decouple the cost of natural gas from the oil quotations. This will allow gas producer sector to develop independently. And gas sector, including in Ukraine, has great prospects.
 
What can you wish the readers of "terminal"?
 
I would like to wish all of us peace.
 
 
"Terminal" № 47 (737) on November 24, 2014