President Viktor Yushchenko has denounced his government’s decision to cancel permits for Ukraine’s first ever production sharing agreement (PSA) in the oil and gas sector.
Prime minister Yulia Timoshenko announced on Monday that the permissions for the project – under which a subsidiary of US-based oil group Vanco is due to start exploration work in the Kerch area of the Black Sea – had been scrapped by the environmental protection ministry.
Yushchenko told Emerging Markets that the government should block the ministry’s decision, and denounced Timoshenko’s remarks as “tactless and groundless”.
The PSA was signed by Vanco with the government of Viktor Yanukovich in September last year, after 18 months of negotiations. Timoshenko claimed at a press conference that the deal had been made “without any conditions and on an unlawful basis”. The state had been “robbed, shamelessly and openly”, she said.
Yushchenko retorted in an interview that Timoshenko had shown “to put it mildly, a degree of intemperance not worthy of a state official”. Such statements “do damage to the image of our country, negatively influence the investment climate and pose a threat to national security”.
Vanco revealed on Thursday that its pool of investors for the project includes Donbass Fuel and Energy Company (DTEK), a division of System Capital Management, the holding company owned by Rinat Akhmetov, Ukraine’s richest man.
DTEK chief executive Maksim Timchenko told a Kiev press conference that the company took a one-quarter share in the funding pool, on an invitation made last year by Deutsche Bank.
The three other partners with roughly equal shares are: Vanco itself; Shadowlight Investments, owned by Russian telecoms magnate Evgeny Novitsky; and Integrum Technologies, an Austrian investment vehicle whose beneficiaries representative Gerhardt Eckert declined to reveal.
Jeff Mitchell, senior vice president of Vanco, told journalists that he had proposed talks with the government to overcome the “serious misunderstanding” about the project. The company has also started arbitration proceedings under international law.
Mitchell said that Vanco is poised to sign a $70 million contract to reserve a newly-built vessel to undertake the work in early 2010.
Environmental protection minister Georgiy Filipchuk told Zerkalo Nedeli newspaper at the weekend that the granting of special permission for the exploration block to Vanco Prykerchenska, a special purpose company registered in the Virgin Islands, “did not correspond to the qualification conditions of the tender”.