Ukrainian subsoil resources require efficient users

04-12-2019

In 2018, BRDO conducted a comprehensive research of the oil and gas reserves market. Based on its results, we have developed and submitted a package of proposals to provide equal subsoil access, simplify the procedure for selling permits, ensure obtaining geological information digitally, stimulate production and attract investments in the industry to the Government.

At present, some of these proposals have finally been implemented. In particular, the Government adopted Resolution No.960 providing for the extension of a pilot project on the sale of special permits for subsoil use through electronic auctions for a year. Such a procedure for auctions is more efficient and open to investors and also reduces the likelihood of abuse by unscrupulous participants.

An important innovation of the experiment is the reduction of the initial price for sites to be auctioned again, as well as the introduction of a ‘Dutch auction’ (a step-by-step reduction of the initial price) for the sites that were not purchased twice.

In addition, Resolution No.928 that authorizes the State Service for Geology and Subsoil of Ukraine to directly consider the matters of granting, extension, termination, renewal, renewal and revocation of subsoil use permits was adopted. Earlier, a special commission composed of representatives of the Secretariat of Cabinet of Ministers, ministries and other CEBs was created for this purpose, but this gave rise to collective irresponsibility and corruption. From now on, the Chairman of the State Service for Geology and Subsoil is personally responsible for violation of the procedure of granting special permits.

We strongly support the Government in implementing these changes! However, we emphasize that currently, there is a quite limited number of potential subsoil use sites that can be offered to investors.

The state should make rational use of the resource base to strengthen its energy security, including by increasing production of energy resources. Therefore, it is absolutely necessary to encourage companies that have special permits to use them effectively. Those business entities that are unable to fulfill their commitments to extract resources should be encouraged to refuse special permits they obtained. In such a way, the state will be able to set these sites for auctions to attract efficient investors and ensure more rational subsoil use.

The relevant proposals have already been developed by the BRDO Office and submitted to the authorized government authorities for consideration and revision. We look forward to the further implementation of changes needed to fully reform this sector!

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