Ukraine put up 10 natural gas and oil concession blocks up for auction on March 6 in its first licensing round conducted via an online auction, but only three of the blocks attracted buyers.
The three blocks were sold by the State Geological Service of Ukraine for a total of Hr 141 million ($5.1 million) to: Burisma Group owned by tycoon Mykola Zlochevsky (Hr 25.1 million); DTEK, owned by Ukraine’s richest oligarch Rinat Akhmetov (Hr 85 million); and Ukrgasvydobuvannya, a subsidiary of state-owned oil and gas monopoly Naftogaz (Hr 31 million).
“This was the first transparent tender for the sale of oil and gas licenses in Ukraine,” said Alexander Paraschiy, an analyst with Concorde Capital investment firm, commenting on the auction. “If such tenders become a regular occurrence, they will benefit the nation’s investment climate and energy independence, enabling private and state producers to better plan their expansion and investment in new license development.”
“State budget revenues also stands to benefit.”
The 10 gas reserve sites offered during the first licensing round are estimated to contain 86.25 billion cubic meters of natural gas and 16.3 million tons of liquid oil, according to the Association of Gas Producers of Ukraine, or AGPU.
But Roman Opimakh, head of the AGPU, told the Kyiv Post that there was a lack of interest in all but three of the blocks for a number of factors, including high prices and the unclear potential of some of the blocks. He also said that the process was more difficult for foreigner bidders to participate in. He said that AGPU had noted the difficulties, and would propose ways for them to be resolved.
All the same, the three gas-rich concession blocks were sold at a much higher price than the initial price offered – Hr 45 million ($1.6 million).
DTEK and Ukrgasvydobyvannya won the two licenses for concession blocks in Kharkiv Oblast.
The third block is located in Poltava Oblast and went to Zlochevsky’s Burisma Group.
Zlochevsky was Ukraine’s ecology minister and later deputy head of Ukraine’s National Security and Defense Council under former President Viktor Yanukovych, who was ousted in 2014 during the EuroMaidan Revolution.
Zlochevsky has also been the subject of an alleged corruption case. However the allegations against the former minister, who owned an extremely luxurious 4.5 hectare residence near Kyiv, were dropped by the Prosecutors General’s Office in 2015.
