Ukrnafta output to fall 80% by 2019 if it keeps losing licenses, CEO says

Ukraine’s leading oil producer Ukrnafta (UNAF UK) will practically cease to operate by 2019 if it isn’t able to extend its licenses, CEO Mark Rollins told a roundtable on July 11. The company will have to cut crude oil production by 82% by 2019 compared to 2016 levels, he said. So far, the company has had to stop production at its eight deposits this year due to the refusal of authorities to prolong its production licenses, which has already caused about a 20% decrease in daily output of oil and gas. The State Geological Service based its refusal on Ukrnafta’s owed tax payments (USD 0.5 bln), a claim the company says is groundless. In particular, it refers to a Ukrainian court ruling that tax debt should not be the basis for rejecting extending a production license.

On June 7, Naftogaz of Ukraine, the state gas production monopoly that is a key shareholder of Ukrnafta, reported that it has addressed all the necessary authorities to assist in the resolution of Ukrnafta’s licensing issue.

Meanwhile, Ukraine’s parliamentary fuel and energy committee is going to consider Ukrnafta’s licensing and debt issues on July 14, MP Oleksandr Dombrovskiy told the Ukrinform news agency on July 11. In case a compromise is reached, he expects some of the legislative initiatives aimed at resolving Ukrnafta’s problems could be taken this autumn.

Alexander Paraschiy: So far, it is hard to tell whether Ukrnafta’s licensing issues will be resolved soon. Besides the conflict of its two major shareholders (Naftogaz and Igor Kolomoisky), the company is also falling hostage to the confrontation between the state and Kolomoisky on the nationalization of Privatbank (PRBANK). We continue to believe the chances for Ukrnafta to remain a going concern are low.