International energy group Burisma took part in the annual Platt’s European Gas Summit, which was held on September 27-28 in Düsseldorf, Germany. The main topic of the 10th anniversary Summit was “Industry is facing new challenges: how to adapt and survive”. At the Summit, Burisma’s Chairman of the Board of Directors Alan Apter represented the Group. The main topic which Burisma addressed was: “Will Ukraine be able to become gas-independent?”
“To meet the Government’s goal of gas sufficiency through domestic production by 2020, the Ukrainian market needs to become more encouraging of domestic private producers willing to invest in gas production At the current time, these producers are under tremendous pressure caused by importers of natural gas from Europe, which constantly increase their role, significance and number. This development negatively affects the ability of the domestic private producers, and indeed of potential new international investors in gas production, to make further investment at an acceptable return and thereby makes domestically produced gas sufficiency for Ukraine substantially harder to achieve”, noted Mr. Apter.
According to Mr. Apter, Ukraine has all the readily exploitable reserves necessary to become self-sufficient through domestic gas production by 2020, and eventually to become an exporter of gas to Europe, but this will only be possible if the Government reduces the fiscal “pressure” on domestic production through changes to the current tax regime, which materially exceeds average European tax regimes for the gas production sector.
Based on recent research on taxation applicable to gas producers in European countries by Deloitte and IHS Energy outlook of Ukraine’s E&P sector, the Association of Gas Producers of Ukraine, as well as other industry experts found a solution that would ensure stable income for the state budget and a gradual increase in domestic production by introducing a reduced royalty rate of 12% for new wells next year.
“We are well aware that the state budget of Ukraine is under pressure, and we are doing everything possible to support the Government in this difficult time. But we are convinced that a reduced tax regime for new wells will motivate existing and potential investors expand their drilling activities and substantially increase domestic gas production and thereby increase overall budget revenues from the gas sector”, concluded Mr. Apter.
A similar point of view about the need to stimulate investment interest through a reduced taxation system was expressed by JKX Oil & Gas, another domestic producer in Ukraine represented at the Summit.
Burisma is an international energy Group whose main focus includes natural gas production, oil & gas services and alternative energy. Burisma Group is the largest independent gas market player in Ukraine. Current annualized production exceeds 1.1 billion cubic meters of natural gas.
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