A subsidiary of Ukraine's largest oil producing company has decided to sue for control of a strategic oil field.
The joint venture Ukrkarpatoil Ltd. is one of the key raw materials outposts of Ihor Kolomoisky's Privat Group in western Ukraine. For the past two decades, this company controlled the large oil-producing Bytkiv-Babchynske field, but lost control last year. Management is now desperately trying to revive it and has even achieved initial success. However, at least one more court case must be traversed before the joint venture can be fully revived.
As DS reported, Ukrkarpatoil Ltd., a joint venture, has been operating the Bytkiv-Babchynske field (Ivano-Frankivsk region) since the mid-90s, when the company was founded by Ukrnafta and the American Carpatsky Petroleum Corporation of businessman Leslie Texos. Several years ago, Ukrnafta, with the help of Ukrainian courts, became the sole owner of this joint venture, but the company was unable to reap the full benefits: in the middle of last year, Ukrkarpatoil Ltd.'s 20-year special permit for exploiting the oil and gas field expired.
Privat Group, which controls Ukrnafta, did not blame Oleh Malchik, the director of the joint venture, for this. Firstly, because he only assumed his position in February 2015 (a few months before the special permit expired). Secondly, Malchik attempted at least twice to obtain a license extension from the State Service of Geology and Subsoil. These attempts were ultimately unsuccessful: the State Service of Geology and Subsoil rejected the petition, citing the applicant's incomplete submission of documents (which did not include an expert opinion on the state review of the subsoil geological survey reports).
In short, while the company was trying to correct this error, the special permit expired, and with it, the company's patience: lawyers took the showdown with officials to court.
In its lawsuit, Ukrkarpatoil Ltd. demanded that the authorities' inaction be declared illegal and that the company be granted a new special permit for another 20-year period—until July 2035. The desired result was achieved on the first attempt: on June 7, the Kyiv District Administrative Court fully upheld the company's claim.
"The case file contains a copy of the expert opinion, which the State Geological Service insisted was missing. This refutes the defendant's claim that the documents were submitted incompletely. Therefore, returning the letter to Ukrkarpatoil Ltd. without extending the special permit is not a proper exercise of the powers granted to the State Geological Service," the court's reasoning states.
It would seem that now would be a time for Igor Kolomoisky's Boy to celebrate victory, but it's too early to uncork the champagne, as the company's opponents have already filed an appeal against the first-instance ruling. Meanwhile, the joint venture is mired in other commercial problems. These include unresolved relations with the State Tax Inspectorate, to which Ukrkarpatoil Ltd currently owes UAH 30 million. And there's an ongoing conflict with Naftogaz Ukrayiny, the controlling shareholder of Ukrnafta, which for several years has been demanding that the National Commission for Regulation of Electricity and Utilities set gas prices for the joint venture.
This is a requirement of Andrey Kobolev’s company (Read more about it in the article Andrey Kobolev. An unnoticed "veteran" of the gas pipeline.) is being put forward for one simple reason: Ukrkarpatoil Ltd. is a participant in a joint production agreement with its owner, the aforementioned Ukrnafta (the parties signed Agreement SD No. 35/71 dated July 1, 2007). Since the latter is 50%+1 share owned by the state, according to the NAK, it is subject to the legal provisions regarding the mandatory sale of extracted gas to Naftogaz at a regulated, reduced price. It is precisely to ensure the practical implementation of this formula that the NAK is demanding that the National Commission for State Regulation of Energy and Public Utilities approve tariffs—these will serve as a trigger for the signing of the corresponding resource purchase and sale agreements.
However, in response to these demands, the head of the National Commission for State Regulation of Energy and Public Utilities, Dmitry Vovk, has so far only shrugged his shoulders: tariffs for Ukrkarpatoil Ltd. have long been approved, but in practice they are not in effect due to the Privat Group's slow challenge to them in court.
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