Ukraine to hold 12 tenders for Oil & Gas Production Sharing Agreements

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

within 3 months after the official announcement

3

Determination of the successful applicants

within 1 month from the final date applicable to bid submissions

4

Conclusion of the PSAs

within 1 year from the publication of the results of the tenders (can be extended by 6 months)

If you would like to know more about the subject covered in this publication, or our services, please contact Dmytro Fedoruk and Rob Shantz.