Kyiv, December 5, 2023
The Asset Recovery and Management Agency (ARMA) will not initiate the termination of the management agreement with “Ukrnafta” PJSC for the seized assets of the company “Ukrnaftoburinnya” due to the decision of the Sixth Administrative Court of Appeal, which resulted the company losing its license for a special permit to use the subsoil of the Sakhalin oil and gas condensate field.
We emphasize that the management agreement with “Ukrnafta” PJSC (signed on June 14, 2023) does not contain any provisions that interpret the revocation of a special permit for subsoil use as a sufficient reason for terminating the management agreement.
The ARMA does not intend to look for a new asset manager for Ukrnaftoburinnya until the current manager has exhausted all legal options to resolve the current situation. “Ukrnaftoburinnya” has already filed a cassation appeal to the court. Only if the Supreme Court decides that the special permit is completely lost, the management contract can be prematurely terminated.
The Agency has also taken urgent measures to resolve the situation and submitted requests to the State Tax Service of Ukraine and the State Service of Geology and Mineral Resources of Ukraine to determine the position of the central executive body responsible for issuing and cancelling subsoil use permits.
Furthermore, ARMA intends to establish an interagency working group that will include representatives of state authorities and independent experts. The purpose of its work is to ensure the fulfillment of the terms of the agreement and the receipt of income to the state budget.
“A valid management agreement for “Ukrnaftoburinnya`s” seized assets should ensure stable budget revenues. And anyone who, in times of war, carries out activities to prevent hydrocarbon production commits a crime against the people. If such decisions are made with the intention to avoid paying to the budget and to prevent the seized assets from being used for profit, ARMA will react immediately,” commented Olena Duma, the Head of ARMA. – According to the terms of the document, “Ukrnafta” PJSC is obliged to transfer 90% of its revenues to the state treasury. Therefore, the manager must make the relevant payments to the budget at the beginning of next year. At the same time, ARMA will ensure that the state's interests are met and that the budget receives the profits.”
As a reminder, on May 23, 2023, the Government agreed with the proposal of ARMA and the Ministry of Defense to apply a special procedure for transferring the assets of “Ukrnaftobureniya” into the management of “Ukrnafta” PJSC. After signing a management agreement, the company started resource extraction this summer.
In the second half of 2023, the manager of “Ukrnaftobureniya” demonstrated high performance (the company earned UAH 700 million in profit in the first half of the year), launched new wells and announced plans to triple its profits.
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