Last gas for Ukraine

What made the government to reduce dependence on Russian gas

 

Private gas companies offers an alternative settlement of tax liabilities. Subsoil users will be able to transfer part of the produced gas to the amount of their rental obligations "Naftogaz of Ukraine". This provision is contained in the bill №2395, initiated by Alexander Onishchenko, the People's Deputy (group "will of the people"), Deputy Chairman of the Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety. "Today, on the shoulders of gas producers to put more tax burden. Said document should facilitate the fiscal pressure on the industry, "- said Onishchenko.

 

Fail-enrolled?

 

The document states that the NAC within three working days after the written request Gazodobytchik obliged to conclude a special agreement and the act of reception and transmission of gas. Amount of the contract shall not exceed the number of tax obligations to pay rent. The price of gas producing company calculated taking into account the ceiling value established for the industry and other users of the National Commission, carrying out state regulation in the energy and utilities (NKREKP). After the actual transmission of natural gas NAC gas producers are exempt from paying rent and liability for delay in payment.

 

The rationale for this bill at least questionable. This initiative - a return to the 1990s, when the course was barter, kill liquidity, says a representative of a major gas company, who wished to remain anonymous: "Markets need the money and liquidity, rather than barter." Alexander Gorbunenko, CFO Burisma Holdings, said that the said document contains a potentially serious enough bureaucracy and corruption component. "Imagine every company must agree to sign all draw with the state company. In theory, such an approach would reduce the fiscal pressure on private companies, as they would not have to pay rent to the shortage of own funds, but there is great uncertainty with how these operations will be taken by the State Fiscal Service, "he -narikae.

 

It is rather a means of "Naftogaz" and not support gas producers, says Arthur Somov, Financial Director of "Karpatygaz." He explained that since December NAC began to sell gas to commercial customers and declares unrealistic amounts of fuel, while the transfer of gas on account of rent will allow the state company to fill the amount of fuel that is missing.

 

Tighten their belts

 

But most importantly, that such an initiative would not solve the main problem in the industry. Today, private gas companies are "on the verge of extinction." The problems began in August last year. Referring to the difficult political and economic situation of the state and the need to fill the state budget, officials have decided to increase the rental fee in the extraction of gas from a depth of 5 km from 28% to 55%, with a depth of more than 5 km - from 15% to 28%. Alexander Kharchenko, director of the Center for Energy Research, said that the first rent increase would only private traders, who work under a contract of joint activity (ADI) with state-owned companies. And it was quite logical, because the government wanted to cover up the scheme by which these gas producers were enriched at the expense of Use ready-made wells without making its investment in development. But later including other private gas producers. Moreover, the government has positioned this event as a temporary, emergency, and from 1 January 2015, the rates of rent promised to return to the previous level. But all of a sudden this event was extended for another six months. Most unlucky owners who work for DSD. Since January 1, they had to pay rent to 60% of the cost of gas, and in the second quarter - 65%, the third - 70%.

 

The consequences of a sharp deterioration in the working conditions unfavorable gas producers. If at the beginning of 2014 the average increase in gas production by private companies exceeds 30%, then at the end of January 2015, this figure dropped to 11%, according to "Neftegazdobycha." Domestic industry associations predict that this year the private sector prosyadet gas production by 1 billion cubic meters. m, which is about $ 4 billion. hryvnia rent payments to the budget, reminiscent of "Smart-Holding".

 

Estimated "Neftegazdobycha" in the current situation, only for 2015-2017 in Ukraine will not receive 5 billion cubic meters. meters of gas produced domestically. This amount will have to be imported with high risks for the energy and economic security. The tax burden in combination with limited sales of gas industry (decision of the Cabinet №647) has forced miners to significantly reduce or even minimize their investment programs. For example, "Smart Energy" only in 2014 reduced the planned investment from $ 44 to $ 22 million. This year the company also cut back on investments of $ 15 million.

 

According Gorbunenko, Burisma 2015 reduced investment in exploration and production of gas from $ 175 million to $ 25 million. Eugene Palenque, Chief Financial Officer of the joint venture "Poltava Petroleum Company" (subsidiary of British JKX), says that his company has decided not to do invest in this year, although it was in terms of a few tens of millions of dollars, "With such tax rates matter payback of capital investments is unclear, so we are forced to curtail investment." Against this background, companies have to lay off staff en masse.

 

With them out of the market are also foreign companies that were major donators of advanced technologies for the domestic industry, the development of which remained at the level of 80-90-ies. In December 2014 the US company Chevron abandoned the project for the extraction of shale gas in Western Ukraine, specifying the motives for a twofold increase in the tax burden on the industry. In a similar statement was made by the British-Dutch company Shell, which on March 12 stopped exploration in the Kharkiv region.

 

And they can understand, because today began gas production is not only profitable, but also provides some loss. According to estimates by Oleg Bakulina Acting President of All-Ukrainian public organization "Union members liberalization of the gas market", now the average cost of production is $ 150, or 3493.5 hryvnia (at the rate of hryvnia National Bank 23.29) per 1,000 cubic meters. meters of natural gas. On March 1, ceiling prices for industrial consumers is set at the level of 8900 hryvnia / 1000 cu. m. In general, companies pay 55% of the rent. As a rule, to support the implementation of the enterprise discount providers 10-12% of the full level, that is obtained about 7900 hryvnia per 1,000 cubic meters. meters of natural gas. The economy is as follows: 7900 hryvnia (discounted price) - 4985 hryvnia (55% of the rent) - 3943 hryvnia (cost). Total damage turns 488 hryvnia per 1,000 cubic meters. meters of gas.

 

Can still be saved

 

Rates of rent in Ukraine - one of the highest in the world. In neighboring Poland annuity rate is at 19%, in Romania - 30%, Azerbaijan - 26% in the United States - an average of 18-20% (data "Smart-Holding"). The government is well aware, but months of talk about tax cuts Prime Minister Arseniy Yatsenyuk so useless and failed. There are in the parliament and the bill, which returns rates of rent to the previous level, but he did not go further registration. Subject to rapid and effective reform oil and gas industry only "Neftegazdobycha" within the next 5 years, has the potential to increase gas production in the 6 billion cubic meters. m.

 

Som said that the attractiveness of gas production will return to the rent does not exceed 30%. Agrees with him Gorbunenko, adding that to create the optimal regulatory and investment environment requires a systematic approach that provides a range of activities. For example, the granting of privileges on customs duties on imports of equipment (stimulates the drilling of new wells), equal access to the miners pipelines, a full restart of the legislation in the oil and gas industry - a modern professional needs (based on the views of industry and experts) a comprehensive set of laws (eg Code) who decided to have those critical issues facing the industry, and so on.

 

Subject to rapid and effective reform oil and gas industry only "Neftegazdobycha" within the next 5 years, has the potential to increase gas production in the 6 billion cubic meters. m. This will compensate 25% of the current needs of Ukraine in the import of energy. If other companies develop similar pace for the past 5-7 years the demand for imported gas would be minimized or completely disappeared.

 

According to Alexander Gorbunenko, one of the factors is the return of confidence in the state as a whole and its policies. "Since the beginning of the process of making an investment decision until the first cubic meter of gas from the new well may take one and a half or two years. During this time, the investor must be convinced that the rules will not change 4-5 times, greatly affecting the economic viability of each project. In the meantime, we have less than six months, the rules have changed three times. "

 

 

March 20, 2015

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