Introduction of sanctions (regardless of whether they are legally applied to a citizen of Ukraine or not) should deprive the aggressor state of resources, instead of harming the State of Ukraine, its economy and citizens. With this message Ukrgazvydobutok company from Smart Energy Group appealed to the National Security and Defense Council of Ukraine, the Cabinet of Ministers of Ukraine, the Ministry of Economy, the Ministry of Energy and the Ministry of Social Policy in connection with the ongoing deterioration of negative consequences caused by suspension of the special permit for production of hydrocarbons at Ostroverkhivske field owned by the company.
As Smart Energy Group has repeatedly reported, due to a series of legal decisions (removal of new beneficial owners from the registers by the Ministry of Justice, implementation of orders of the State Geology and Subsoil Service), individual companies of the group, including Ukrgazvydobutok, were forced to completely stop their activities. At the time of the shutdown, daily production of gas was at the level of 395 thous m3, which provided about 5 mln UAH in revenue to the budgets of all levels every day.
Thus, due to the shutdown of Ukrgazvydobutok company from April to June 2023 only, the budget of Ukraine will no longer receive about 300 mln UAH in taxes, and the state economy will lose about 35 mln m3 of gas that was not produced. Thus, the State bears direct losses in the form of lost revenues and volumes of natural gas every day.
However, in its appeal to the state authorities, the company emphasized that the issue is not only about the loss of income of the company's workforce, future revenues of millions of sums of rent and other payments to the budget of Ukraine, in addition to this, there is a risk of irreversible losses and devaluation of assets in the subsoil. After all, the processes that occur in hydrocarbon deposits as a result of long-term shutdowns (from several days) can lead to irreversible hydrodynamic changes that significantly worsen filtration properties of gas-bearing formation and, accordingly, reduce productivity of wells. Negative impact of long shutdowns is determined by condensate and water content in a product, which is related to liquid forcing into formations and decrease of phase filtration properties of gas reservoirs.
At the same time, the State and its relevant bodies, based on considerations of national security and energy independence, which is especially important during the war unleashed by russia, would be obliged to ensure rational subsoil. Therefore, even suspending a special permit for the subsoil use, the State must act in a way that will protect the rights and interests of citizens and contribute to the achievement of the goals of protecting the sovereignty of Ukraine.
Smart Energy Group emphasizes that Ukrgazvydobutok company is an exclusively Ukrainian company that carries out its economic activities on the territory of Ukraine for the sake of its economy and is an integral part of building its energy independence. None of the companies of the Group, and Ukrgazvydobutok in particular, has any relationship and has never had any ties to the russian federation as an aggressor state.
Therefore, as a responsible Ukrainian business, the company turned to the state authorities asking to urgently resolve issues, further development of the situation and activities of gas producing company depend on. In particular, to improve a mechanism of application of provisions of the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Regarding the Improvement of Legislation in the Field of Subsoil Use" dd. December 1, 2022 No. 2805-IX.
Smart Energy is a part of investment group Smart Holding and is in charge of implementing exploration projects, commercial development of the hydrocarbon deposits. It is ranked in top 5 biggest private gas producers of Ukraine, producing over 1 mln m3 of gas per day in total at the beginning of Russia's invasion of Ukraine.
Oil & Gas business block of Smart Energy is represented by gas producing Ukrgazvydobutok (Kharkiv region) and Enwell Energy, a listed British company having assets in Poltava (the Representative Office of Regal Petroleum Corporation Limited and Arkona Gas-Energy LLC) and Kharkiv regions (Prom-Energo Produkt).