Ukrnafta Chairman: Legislation Changes Needed to Encourage Competition

The chairman of the board of Ukraine's largest oil and gas producer Ukrnafta has said that changes in legislation are needed to improve competition in the country's gas industry.

Speaking at the 2016 Ukrainian Gas Investment Forum in Kiev on March 23, Mark Rollins said that a number of changes were needed to increase competition in the market and, in doing so, improving activity in the sector.

“I want as many new players on the gas market competing with me as possible," he said. "Those new players will bring new capital, but more important – new knowledge and competencies. I see a huge advantage in that, as competition promotes innovation."

However, to achieve that aim, the government would need to make some changes to current legislation, including tax regulation, he said. 

"We need changes in legislation to make it easier for us to partner with other players effectively. It will benefit the whole industry and considerably accelerate the demand for more production in Ukraine."

In response, head of the State Service of Geology and Mineral Resources of Ukraine, Nikolai Boyarkin, said he agreed with the assessment and was ready to ensure transparent rules for all market players.

Rollins' comments echo some of those made by Ukraine's energy minister at the same event. Also speaking on March 23, Volodymyr Demchyshyn said that over-regulation and high tax rates were the biggest obstacles facing Ukraine's domestic gas production currently. 

"Although the procedure [for authorisation] is clearly spelled out, [the investor is required to receive] 70-80 permits... Today, on average, it takes several years [to complete the process]," he said. 

He said that a new long-term strategy was needed to continue to deregulate the market; simplify the process for extraction permits; for tax revenue; and to increase competition.

Ukrnafta's Ambitious Production Plans

At the Ukrainian Gas Investment Forum, Ukrnafta's chairman also outlined an ambitious strategy to increase oil and gas production in the coming years. Over the next decade, Rollins says the new strategy will increase oil production by 300% and gas by 50%, while also increasing profitability threefold. 

"It may sound like an ambitious target, but it’s more of a conservative target," Rollins said. "Up until now there was no track record of Ukrnafta producing a strong strategy, so it’s almost like a new process. We believe the strategy is good for Ukrnafta, [the] Ukrainian oil and gas industry and for Ukraine so we [will] proceed with our strategy as soon as we can."

Ukrnafta's share in the country's oil and gas condensate production was 69.2% in 2014, according to its website, while its share in total gas production was 8.6%.

Erica Mills