Ukr­nafta tries to dig it­self out of debt, stag­na­tion

Kyiv Post Legal Quarterly - - Contents - BY JOSH KOVENSKY KOVENSKY@KYIVPOST.COM

For Ukraine, en­ergy in­de­pen­dence doesn’t just mean wean­ing it­self off im­ported Rus­sian gas.

For Ukr­nafta, Ukraine’s state-owned oil and gas ex­trac­tor, fi­nan­cial in­de­pen­dence means break­ing free from share­hold­ers who have brought the com­pany to the verge of bank­ruptcy or a pos­si­ble fire-sale price to a pri­vate owner.

A new man­age­ment team wants to over­haul the com­pany, but such a step will re­quire the ap­proval of the com­pany’s gov-

In 2015, the sub­sidiaries of Burisma Group in­creased the vol­ume of nat­u­ral gas pro­duc­tion. What are your plans for 2016, due to which fac­tors does Burisma ex­pand its busi­ness?

We ex­pand our busi­ness due to equip­ment in­vest­ments, peo­ple and tech­nol­ogy. At the mo­ment, we have as­sem­bled the best ex­perts and the most in­no­va­tive equip­ment, which al­lows us to drill slanted wells 2,900 me­ters deep in three weeks.

This year Burisma plans to drill 16 wells over 4,000 me­ters, and 5-7 wells un­der 4,000 me­ters. At the mo­ment, seis­mic sur­veys are be­ing con­ducted at four units at the same time. We put into op­er­a­tion a well with a depth of 5,620 me­ters, which pro­vides a profit of 280,000 cu­bic me­ters of gas and 25,000 cu­bic me­ters of con­den­sate per day. And we have not un­cov­ered the most pow­er­ful hori­zons yet. Ac­cord­ing to the re­sults of the well ex­plo­ration, it was taken a de­ci­sion to drill an­other well within the Vodyanovsk field. In May, we plan to drill a well with a planned depth of 5,800 me­ters, and to ac­com­plish it in five or six months. In 21 days, there was drilled a well 2,870 me­ters deep with an in­cli­na­tion an­gle of 45 per­cent within the Pro­le­tar­ian field. All this al­lows us to reach the planned pro­duc­tion vol­ume of 1.8 bil­lion cu­bic me­ters of gas, but this year we plan to in­crease the vol­ume of gas pro­duc­tion up to 2 bil­lion cu­bic me­ters of gas.

What projects did Burisma im­ple­ment in 2015?

We built an ad­di­tional gas pi­p­lene be­tween Kharkiv and She­be­linka, which cost us Hr 18 million, and con­veyed it to “Transgaz” sys­tem for free. This made it pos­si­ble not only to fa­cil­i­tate the work of Kharkov ring, but to op­er­ate the Ukrainian gas trans­port sys­tem more ef­fi­ciently. With this ring all the gas com­pa­nies (in­clud­ing state-owned ones) op­er­at­ing in Kharkiv Oblast can in­crease the out­put with­out vi­o­lat­ing the reg­u­la­tions. This is a net in­vest­ment in the gov­ern­ment project for the more ef­fi­cient gas pro­duc­tion. To­day there are no sim­i­lar in­vest­ments, where pri­vate com­pa­nies would in­vest in the state sys­tem of gas trans­mis­sion.

Burisma also launched a gas pipe­line over 30 kilo­me­ters long in Kharkiv Oblast which con­nects gas trans­port providers’ nets to our com­pany fields. This will in­crease pro­duc­tion and en­sure trans­mis­sion of 4 million cu­bic me­ters of gas per day. Last year Burisma an­nounced about its ac­tiv­i­ties in Kaza­khstan and Italy. What projects may con­trib­ute to the com­pany's port­fo­lio in 2016?

Even though, the Hold­ing’s ac­tiv­i­ties dif­fer in these two coun­tries (in Italy, the hold­ing com­pany de­vel­ops geo­ther­mal field), we con­vey our com­pe­tences to in­ter­na­tional mar­kets. First of all, our ser­vice and our drilling tech­nolo­gies. Burisma owns the largest rig fleet in Ukraine, in­clud­ing heavy drilling rigs, that en­able to reach the depth of up to 10,000 me­ters.

In Kaza­khstan, we signed an agree­ment with the Na­tional Oil and Gas Com­pany "Kaz­mu­nay­gas" and its sub­sidiaries. For ex­am­ple, we signed a con­tract with "KMG Drilling & Ser­vices" to per­form a drilling of a direc­tional ap­praisal well at the Urikhtau field.

In Italy, it’s a new as­pect, spe­cial­iz­ing in the elec­tric­ity pro­duc­tion from re­new­able and en­vi­ron­men­tally friendly geo­ther­mal sources in Europe. An in­ter­na­tional group Gesto In­ves­ti­mento e Gestão (G.I.G.) be­came our part­ner in the Ital­ian project, and now we co­op­er­ate on three projects.

Com­pa­nies in Mex­ico and the United Arab Emi­rates would also like to see us, as their investors and part­ners. Cur­rently we es­ti­mate the prospects of a se­ries of projects; we will be able to tell you more about it later. Is it worth­while to in­vest in Ukraine at the mo­ment?

But, in spite of macroe­co­nomic and po­lit­i­cal risks, we con­tinue to in­vest in Ukraine. Our prin­ci­pled po­si­tion is to form an en­ergy in­de­pen­dent state and de­velop the Ukrainian gas pro­duc­tion mar­ket. The fu­ture of Ukraine de­pends on hav­ing an en­ergy in­de­pen­dent state, which would be able to pro­vide com­pletely its mar­ket with do­mes­tic ex­tracted gas.

De­spite mar­ket ex­pan­sion, the Ukrainian mar­ket re­mains strate­gic for us. Burisma is the most rec­og­niz­able Ukrainian gas com­pany in the world. We pro­mote the “made in Ukraine” brand in the world as a part of the qual­i­fi­ca­tion po­ten­tial of Ukrainian uni­ver­si­ties and the tech­no­log­i­cal pos­si­bil­i­ties of the Ukrainian com­pa­nies. The com­pany be­came a “guide” of en­ergy in­de­pen­dent im­ple­men­ta­tion in terms of Ukrainian na­tional pol­icy.

De­spite the dif­fi­cult sit­u­a­tion in the coun­try and "un­friendly" fis­cal pol­icy in 2014-2015, we con­tinue work­ing on our projects on the nat­u­ral gas ex­plo­ration and pro­duc­tion. In 2014, pro­duc­tion amounted to 692 million cu­bic me­ters, in De­cem­ber 2015, we man­aged to in­crease the pro­duc­tion vol­ume to 1.2 bil­lion cu­bic me­ters in an­nual equiv­a­lent.

Last year our com­pa­nies paid about Hr 3 bil­lion in taxes. Ac­cord­ing to this num­ber, the group is among the three largest in­dus­trial tax­pay­ers of the coun­try, which demon­strates the so­cial ori­en­ta­tion of the com­pany and com­pli­ance with in­ter­na­tional prac­tices.

Does Burisma plan to co­op­er­ate with a state-owned com­pany “Ukr­gas­doby­cha”? In which for­mat?

We ac­tively upgrade our rig fleets. This year we pur­chased a new drilling rig SK — 3000 with the load ca­pac­ity of 750 tons. This is the most pow­er­ful rig, not only in Ukraine but also in the Commonwealth of In­de­pen­dent States. We also bought a new U.S. fleet for hy­drofrac­tur­ing, which con­sists of 15 pumps with a to­tal ca­pac­ity of 35,000 horse­power. We can say, that this na­tional project will give an op­por­tu­nity to par­tic­i­pate in ten­ders for ser­vices of var­i­ous com­pa­nies, in­clud­ing the largest state-owned gas pro­ducer "Ukr­gas­doby­cha."

We have al­ready signed a co­op­er­a­tion agree­ment with lead­ing Amer­i­can com­pany Propetro, which per­formed more than 10,000 suc­cess­ful hy­drofrac­tur­ings and is ready to co­op­er­ate if we win the ten­der.

We also pur­chased seis­mic equip­ment, which lets us cover large ar­eas and pro­vides high qual­ity seis­mic in­for­ma­tion. In this field we co­op­er­ate with Daw­son Com­pany.

Ukrainian gas em­ploy­ees stand near a gas in­stal­la­tion in Bo­yarka near Kyiv on April 22, 2015. Ukr­nafta has suf­fered from years of mis­man­age­ment, leav­ing it with out­dated and de­cay­ing in­fra­struc­ture. (Kostyan­tyn Ch­er­nichkin)

Newspapers in English

Newspapers from Ukraine

© PressReader. All rights reserved.