Nadra Ukrayny chose an investor for Yuzivka gas field. Now it’s the Cabinet of Ministers’ turn to conclude the agreement – official

Nadra Ukrayny chose an investor for Yuzivka gas field. Now it’s the Cabinet of Ministers’ turn to conclude the agreement – official
August 10, 2016.

As a result of competition Ukraine selected new European investor to develop its gas reserves in East Ukraine and will soon decide on singing the production sharing agreement for 50 years

Kyiv, August 10, 2016.  The contest on participation in Yuzivka gas field production sharing agreement is over. The gas field is located in Donetsk and Kharkiv regions. The winner is Yuzgaz B.V., which is 100% owned by Emerstone Energy registered in Luxembourg. However, the final decision on the assignment of rights and obligations under the production-sharing agreement rests with the Cabinet of Ministers of Ukraine. The government has 90 days to decide on it. This was informed by Yaroslav Klymovych, Head of the Board, national joint stock company Nadra Ukrayny”, at a briefing at Ukraine Crisis Media Center. According to Klymovych, the following three companies participated in the contest: Burisma Holdings Limited, Balkash Petroleum B.V., and Yuzgaz B.V.

Director of Nadra Yuzivska LLC, Victor Nazarkevych, pointed out that the Yuzivka gas field production sharing agreement is for 50 years. The first five years are the most risky, because at the geological exploration stage an investor does not know whether he will profit. According to Nazarkevych, the winner has submitted the most interesting proposals. Yuzgaz B.V. has proposed the most comprehensive t exploration program, including commitments for 15 wells, and the highest initial commitment to invest  200 million USD. The company has also confirmed its readiness to pay bonuses to the state: 25 million USD for the first commercial gas, 50 million USD for the first development and 100 million USD after reaching the maximum production,” noted Mr. Nazarkevych. He also informed that in the areas of planned drilling investment will be made in local schools, hospitals and other social infrastructure.

According to Victor Nazarkevych, the state’s share in the agreement is expected to be 25-60 per cent. The agreement also provides that if Yuzgaz B.V. fails to perform its financial obligations for 200 million USD, this obligation will transit to the parent company. In case of signing the agreement with Yuzgaz B.V., Shlumberger will manage all technical aspects of the project and perform the necessary maintenance work.

Mr. Nazarkevych informed about a meeting of Nadra Yuzivska LLC shareholders, making a decision that IBS-Heoservis LLC withdraws from Nadra Yuzivska LLC. Mr. Klymovych noted that it is also planned to intensify work in Olesko shale field in Western Ukraine (Lviv, Ternopil and Ivano-Frankivsk regions). “We start speeding up the work on this project. In the near future we will turn to the interdepartmental commission, which should create an appropriate body and work out an appropriate tool on the principle of open competition in order to attract investors,” explained Klymovych.

To remind, in 2013, Nadra Yuzivska LLC signed the hydrocarbon production sharing agreement with Shell Exploration and Production Ukraine Investments (IV) B.V. However, after the outbreak of hostilities in Donbas, Shell withdrew from the agreement alleging the long-term force majeure.

Yuzivka gas field reserves are more than 3 trillion m³ of standard fuel. Shell estimated that it is possible to produce 10 billion m³ per year at base scenario, and 20 billion m³ – at optimistic scenario.

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