24.01.2025
Due to ill-considered and inconsistent decisions by state authorities, Smart Energy group is
forced to once again stop the operation of one of the largest private gas producing enterprises -
Representative Office of Regal Petroleum Corporation Limited, which is 100% owned by British
public company Enwell Energy and operates in Poltava region. Before shut down, wells of the
company produced a total average of 210,000 m3 of natural gas, 35 tons of condensate, 25 tons
of oil and 19 tons of liquefied gas per day.
As a result of the shut down of gas production enterprise, by the end of 2025 the state will
lose 78 million m3 of natural gas, 13 thousand tons of condensate, 9.3 thousand tons of oil and
7.1 thousand tons of LPG. The state and local budgets will not receive more than UAH 1 billion in
taxes, of which UAH 295 million is rent for hydrocarbon production. UAH 1.55 billion of
investments in Ukrainian subsoil will be stopped and almost 200 jobs will be lost. The company
will be forced to begin the process of reducing staff in gas production industry, which is extremely
important today, when the country is at war.
It is worth reminding that the Order of the State service of geology and subsoil of Ukraine
No.535 dated November 15, 2024 suspended the validity of three special permits for hydrocarbon
production owned by the group's companies. This order was adopted in implementation of NSDC
Decision "On application of personal special economic and other restrictive measures
(sanctions)", which was put into effect by Decree of the President of Ukraine on October 8, 2024.
"If the enterprise's operation is not unblocked in the near future, the state will again suffer
enormous losses in the form of unproduced gas and uncollected taxes. And subsoil will have
irreversible negative consequences. The worst thing is the complete loss of our currently most
productive well No. 119 of Mekhedivsko-Holotovshchynske field,” noted Oleksiy Zayets, acting
general director of Smart Energy Group.
Due to a long downtime, well No.119, which has extremely complex technological operating
parameters, will be flooded, after which any production will be impossible. This is an average of
60-65 thousand m3/day of natural gas, 6-7 tons/day of condensate, which will not be extracted
and supplied to the country's gas supply system.
As a result, 390 million m3 of residual reserves of natural gas will be irretrievably lost, which
could have been extracted, thereby preventing an increase in the cost of natural gas, including
for population. In addition, due to the actions of state authorities, the budget will lose UAH 2.7
billion in taxes (at current gas prices), in particular: rental payments – UAH 926 million, VAT – UAH
1.08 billion, income tax – UAH 646 million.
"For almost two years now, we have been fighting for the opportunity to work and
contribute to the economy of Ukraine in times of war. The lack of final certainty regarding validity
of our special permits exhausts us as a business and harms the state. These actions are hurting
the company's shareholders, including citizens and other companies in the European Union and
the United States. Everyone loses. "We only want clear government decisions that will allow all
companies in the group to operate stably, produce gas, fill budgets, provide jobs, promote the
development of local communities and help our military," said Oleksiy Zayets.
As a reminder, for almost 1.5 years (April 2023 - June 2024), the validity of special permits
for use of subsoil belonging to companies of Smart Energy group was suspended due to the
Decision of the National Security and Defense Council of Ukraine on application of sanctions
against former beneficiary. During this time, the state lost 195 million cubic meters of gas and
UAH 1.65 billion in tax revenues. Later, state authorities, understanding the importance of gas
production industry for the country, decided to unblock the work of the companies and a
corrective decision was made by the National Security and Defense Council. Thanks to the titanic
professional work of the Smart Energy group team, it was possible to restore the wells operation
within a month, which allowed for continuation of hydrocarbon production. But in October 2024,
the state again imposed sanctions, without assessing consequences of losses for subsoil and
economy, this time against current beneficial owners - trustees, citizens of Cyprus, as a result of
which the group's companies were again forced to stop their activities in November 2024.
Reference
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).