JKX Oil & Gas sues Ukrainian government over lost rental fees

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Source: DollarPhotoClub

The London-based oil and gas exploration company JKX Oil & Gas plc, announced on Monday that it has launched legal proceedings against the government in Kiev, under a bilateral investment treaty between the British and Ukrainian governments.

“JKX is seeking repayment of more than $180 million in rental fees that its Ukrainian subsidiary has paid on production of oil and gas in Ukraine since 2011,” the company said in a statement.

“In these proceedings, JKX is seeking compensation for the losses it has suffered from Ukraine’s treaty violations, including Ukraine’s failure to treat JKX’s investments in a ‘fair and equitable’ manner and failing to comply with commitments made by Ukraine in respect of JKX’s investments,” the company said.

The company’s dissatisfaction with the business environment in Ukraine has been well known for some time.

In a press release issued earlier this year, JKX explained that further to the announcement of sales restrictions imposed on private gas producers by the Ukrainian Government Decree of 29 November 2014, the market available to private gas producers in the country continued to contract with competition for the increasingly limited number of credit-worthy industrial customers becoming intense.

Consequently, JKX anticipated that gas sales may reduce to less than 50 per cent of its production capacity in Ukraine whilst the Decree remained in force and would necessitate shut-in of a proportionate level of gas production.

Furthermore, new budget measures introduced by the Ukrainian Government meant higher taxes for the oil and gas industry in the country including nearly doubling the tax on gas production to close to 55 percent.

Ukraine is believed to hold Europe’s 3rd largest shale gas reserves at 42 trillion cubic feet (1.2 trillion cubic meters), but the current unstable political situation in the country means that exploration is difficult. Both Shell and Chevron still maintain offices in Ukraine but no exploration work is taking place.

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