Conflicts surrounding auctions for special permits and the accusations already leveled against Gosgeonedra indicate that it's premature to talk about transparency in this industry. The country's mineral wealth, especially promising oil and gas fields, appears to remain the preserve of select companies.
Instead of an introduction, here's a disturbing story. On February 26, businessman Yuriy Diment was killed in Kharkiv, shot with an automatic weapon. Numerous theories and speculations were floated at the time. But few paid attention to former head of the presidential administration Serhiy Lyovochkin's assertion that the murder was related to business matters related to gas fields. "This morning, Kernes's closest friend, partner, and associate, Yuriy Diment, was shot dead in Kharkiv. The war over the Kharkiv gas fields is gaining new momentum," he wrote.
Less than a month after these events, on Tuesday, March 22, the first auction of special permits for subsoil use this year took place. The State Service of Geology and Subsoil of Ukraine (Derzhgeonedra) sold five special permits (licenses) for hydrocarbon extraction: two sites in the Kharkiv region and three in the Lviv region. The sale of licenses for the development of Kharkiv deposits caused a particularly significant stir. These two sites are the Murafinska and Yuzhno-Kysivska fields. Why? Let's take things one step at a time.
Bargaining is inappropriate
The latest auction was the most controversial in the past two years. Even during the auction preparations, it became clear that the competition for licenses would not be limited to the bidding process itself.
On Thursday, March 17, the auction committee met and decided to disqualify Kharkiv-based company Yuteksneftegaz from the tender. The State Geological Service stated that the company's submitted documents did not fully comply with auction procedures. According to Yuteksneftegaz, the company had submitted documents to participate in an auction for special permits to exploit the Yuzhno-Kysivska and Murafinska oil and gas fields in the Kharkiv region.
That meeting was not without its share of incidents. Dmitry Abramovich, chairman of the auction committee, asked the only journalist present to leave the room, and only then did the committee meeting begin. The following day, at a briefing, Nikolai Boyarkin, acting chairman of Gosgeonedr, was forced to defend himself for the actions of his subordinate, Dmitry Abramovich, toward the journalist.
Yuteksneftegaz considered the auction committee's actions unfounded and, having received an official refusal, filed a complaint with the Prosecutor General's Office and the National Anti-Corruption Bureau of Ukraine (NABU) alleging corruption on the part of the auction committee of the State Service of Geology and Subsoil, which had barred the company from participating in the auction for special permits scheduled for March 22.
Moreover, representatives of Yuteksneftegaz see the actions of Gosgeonedr officials as a crime qualified as official negligence and abuse of office.
"We believe that the auction committee of the State Service of Geology and Subsoil of Ukraine, using its official position and not without corruption, is attempting to prevent professional oil industry participants from participating in the auction for special subsoil use permits. This, in turn, will lead to a shortfall in revenues for mineral extraction and harm to the interests of the state," the company said in a statement.
The mechanisms for disqualifying bidders from participating in auctions had been tested during previous auctions. For example, during the preparation of the second auction for special permits in November 2015, the auction committee barred the Lviv-based company Nordik from participating due to its outstanding tax debt of 2 hryvnias.
For a company that pays tens of millions of hryvnias in taxes annually and is one of the largest and most disciplined taxpayers in the region, the accusation of unpaid taxes of 2 hryvnias is nothing more than a misunderstanding. The company was unaware of the debts, and when they learned of them, they immediately paid them off. But the State Service for Geology and Subsoil remained adamant and did not reconsider its decision. Nordic was not admitted to the auction, even though it was the company that prepared the Bystritskaya site for the auction.
Bystritskaya Square was then sold to the little-known LLC "Construction and Installation Department No. 77 Zhitlopostach" (Lviv). The price rose from the initial 159,85 UAH to 12129,85 UAH. However, it later emerged that Zhitlopostach had no intention of paying, and Bystritskaya Square was put up for auction again on March 22, 2016, and sold for 2321 UAH.
A similar mechanism for preventing the company from participating in the auction was also used now.
Who are they?
Let's return to the company "shot down" by the commission in March. Utexneftegaz, with a charter capital of UAH 5 million, was created to operate in the oil refining and gas production sector. Matrapak GmbH (Hannover, Germany) and Krasnokutsky Agroshlyakhbud LLC (owned by Dmytro Manko) each own 50% of the charter capital. The company is registered in the Krasnokutsky district of the Kharkiv region. When attempting to contact Utexneftegaz representatives at the number listed in the registration documents, the answering machine stated: "You have reached Esko-Pivnich" (part of Mykola Zlochevsky's BurismaHoldings).
However, as ZN.UA has learned, Yuteksneftegaz was previously sold and currently has no connection to Esko-Pivnich. There is a widespread belief among Kharkiv businessmen that Yuteksneftegaz is controlled by the business circle of Interior Minister Arsen Avakov. However, this information has not been confirmed or denied.
In addition to the aforementioned Yuteksneftegaz, three other companies bid for the special permits to develop the Yuzhno-Kysivska and Murafinska fields: Naftogazenergoprom LLC, Oil and Gas Company LLC, and Ukrgazdob LLC. As it turns out, all of them were registered shortly before the auction was announced: in late February or early March 2016. The directors of these legal entities are both the founders and signatories.
"All of these companies have identical lists of activities. Furthermore, the founder of Ukrgazdob LLC does not have a full address for its location," Yuteksneftegaz's statement reads.
Nafta i Gaz (Kharkiv) was established on February 23, 2016. Its director and owner is Artem Koshel, an unknown figure in the hydrocarbon production industry. Naftogazenergoprom (Kharkiv) was registered a month before the auction, on February 23 of this year. Its founder and director is listed as Alena Singayevskaya, a little-known figure in industry circles. Ukrgazdob (Kharkiv) was registered on February 3 of this year. Its director and founder, Oleksandr Trufanov, as in previous cases, had no prior experience in hydrocarbon exploration or production.
Moreover, the authorized capital of these companies ranges from 23 to 30 UAH—a paltry sum for organizations planning to develop a gas production business, where initial capital investments amount to millions and tens of millions, and often not even hryvnias.
Auction
The auction was tense. It began at 11:00 AM, and a court hearing was scheduled for 9:30 AM, where Utexneftegaz challenged its right to participate in the auction. According to Dmitry Abramovich, chairman of the auction committee, the court rejected Utexneftegaz's claim requesting an investigation into its exclusion from the auction. Both the Yuzhno-Kisivska and Murafinska plots were auctioned.
The Murafinskaya site was sold to Naftogazenergoprom for UAH 5122. Its only competitor for the site was Nafta i Gaz. The competition between these two companies increased the license price by UAH 179,5.
The special permit for the Yuzhno-Kysivska oil and gas field was purchased by Ukrgazdob (Kharkiv) with a starting price of UAH 3285. Its competitor was Naftogazenergoprom, which won the bid for the Murafinska field.
Representatives of Nafta i Gaz, Naftogazenergoprom, and Ukrgazdobych declined to speak to the media after the auction, appearing frankly confused. They all filed out of the auction hall, each carrying identical packages, but continued circling near the auction site for a while before gathering at the Kozel café across from the State Service of Geology and Subsoil of Ukraine building. Representatives of the "competitors" and their handlers certainly had much to celebrate.
Three more licenses in the Lviv region were sold during an auction on March 22. The permit for the Pidhirtsi area development was purchased by the private company Geo-Topo-Cadastre (Lviv) for UAH 614,5, compared to a starting price of UAH 494,5.
Stryinaftogaz purchased the exploration license for the Dobrovlyanska field. The sale price was 455,4 hryvnias, with the starting price at 405,4 hryvnias. The company is owned by Petro Hryniv, Oleh Kurochkin, and Yuriy Petrushko, who are also co-owners of Bohorodchanynaftogaz.
The latest permit for the development of the Bystritsky oil and gas field was acquired by Zakhidnadraservis for UAH 2321. The company is owned by Zinoviy Kozitsky , the principal shareholder of the Gorizonty oil and gas production company.
Recently, the leadership of the State Geological Service (Gosgeonedra) has been focusing on transparency in the government agency's operations, particularly the transparency of auctions for special permits. Gosgeonedra has initiated several important legislative amendments. Specifically, these amendments address Cabinet of Ministers Resolutions No. 615 "On Approving the Procedure for Granting Special Permits for Subsoil Use" and No. 594 "On Approving the Procedure for Conducting Auctions for the Sale of Special Permits for Subsoil Use." Gosgeonedra proposes increasing the approval period for special permits from 60 to 90 days and shortening the geological exploration period from five to three years.
Furthermore, Gosgeonedra would like to resolve the issue of coordinating special permits with regional councils. The latter are extremely reluctant to approve sites, and sometimes simply ignore Gosgeonedra.
However, conflicts surrounding auctions for special permits and accusations already leveled against Gosgeonedra indicate that it's premature to talk about transparency in this industry. The country's mineral wealth, especially promising oil and gas fields, appears to remain the preserve of select companies.
On topic: Why does the devil wear Prada, and Zlochevsky wears Zlocci?
Levochkin. "The Gray Cardinal" and his sister
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