Court allows Ukrnafta to pay tax debt with confiscated gas

High Administrative Court of Ukraine ruled to allow the nation’s top oil producer, Ukrnafta (UNAF UK), to use 2.06 bcm of “confiscated” natural gas as a pledge for its tax debt, the epravda.com.ua news site reported on Feb. 28. The court estimated the value of this gas at UAH 13.6 bln (UAH 6,800/tcm), which corresponds to the amount of Ukrnafta’s tax debt. The ruling allows Ukrnafta to repay its tax debt using this gas, epravda.com.ua reported, citing an anonymous source in the Energy Ministry.

Based on then-valid regulation, the contested amount of gas was taken from Ukrnafta by the state natural gas holding Naftogaz in 2006 and sold to Ukrainian households. Ukrnafta claimed this gas was illegally expropriated by Naftogaz and has pursued legal claims since then, during which numerous court rulings were issued in Ukrnafta’s favor.

In 2015, Ukrnafta’s tax payables swelled by about UAH 11 bln. The company had no liquidity to pay them as it made enormous prepayments for goods to some unknown companies, most likely related to its biggest private shareholder, Igor Kolomoisky. Since then, the company has struggled to restructure its tax debt.

Alexander Paraschiy: The court ruling means that it will be Naftogaz that will pay Ukrnafta’s tax debt that was created when Kolomoisky withdrew funds from Ukrnafta in 2015. This does not looks like the end of Ukrnafta’s tax debt, as Naftogaz will likely appeal the recent court decision. But this enables Ukrnafta to survive as a company.