Ukraine Launches PSA Round for Offshore Block
The Ukrainian government has launched a public tender for the Dolphin offshore block under a production sharing agreement (PSA), said the Association of Gas Producers of Ukraine April 12.
The block covers 9,496 km2 off northwest Crimea in the Black Sea and there exists some seismic data. "Inferred resources" are some 286mn metric tons of oil equivalent. Interested parties have 60 days to submit applications to the PSA Interagency Commission and the fee to take part is $11,000.
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The PSA lasts for 50 years and the work commitment is $55.5mn in the five-year exploration period and no less than five exploration wells.
The cost recovery ceiling will be at or below 70% of gross production until the contractor has recovered all costs and expenses while the state's share of profit petroleum is to be at least 11%.
The royalty rate for the production of liquids under a PSA is 2% and for natural gas is 1.25%.
According to the PSA law, the contractor is required to pay all taxes and charges stipulated by the tax code of Ukraine. The general corporate income tax rate is 18%.
Bidders are promised key industry-standard PSA protections including no future changes of law other than legislative changes relating to matters of defence, national security, public order and environmental protection; fiscal stability – no tax increases will apply to investors; and international arbitration as a dispute resolution mechanism.
Bids will be assessed according to eight main criteria: work program (80 points), experience in oil and gas exploration and production (45), government share at production stages (30), amount of investment (35), financial capability (30), local content (20), rational usage of natural resources (15), and environment protection measures (15).
Although Kiev's PSAs protect investors from adverse legal and tax changes over the course of their 50-yr lives, and offer international arbitration courts to settle disputes instead of local courts, investors might want to see first who wins the presidential elections.
Polls show that a political novice, the actor Volodymyr Zelensky, will beat the incumbent Petro Poroshenko in the run-off April 21. A third candidate, Yulia Tymoshenko, caused upset when she cancelled a PSA for an offshore field signed with a foreign investor Vanco when she was prime minister just over a decade ago, after it had been approved by the previous government. However she did not survive the first round of votes in the 2019 elections.