DiXi Group expert analyzes disclosure of PSAs at an MSG meeting
On 6 July, Olha Polunina, Manager for Sustainable Development at DiXi Group, presented an analysis of the situation with disclosure of extraction contracts in Ukraine and the world during a meeting of the Multi-Stakeholder Group (MSG).
Speaking at the meeting, she pointed out the important aspects arising today with regard to disclosure of production sharing agreements (PSAs). In particular, she mentioned the failure to meet the disclosure deadlines and the unavailability of PSA number (stated only in the abstract concerning Sofiivska site). Also, none of the seven PSA abstracts fully discloses information regarding the composition of expenses recoverable with cost resource. Information concerning the environmental tax and land rent payment obligation has not been provided for any of these sites, either. For most PSAs, the disclosure of payment terms is limited.
“The largest amount of information was disclosed for Sofiivska site, and the least information is available for Uhnivska site. The differences in the disclosures indicate that legislative framework contains insufficiently clear requirements to disclosure of this information, and the entities required to disclose information differently interpret these legislative requirements,” Olha Polunina summarized. “Certain aspects, such as payment procedure, work programs or social obligations, are insufficiently addressed despite clear requirements of the Extractive Industries Transparency Law.
The urgent recommendations presented by the expert include acceleration of deliberation and passage by the Verkhovna Rada of the draft law 3790 on transparency of extraction operations.
The Energy Ministry must specify in greater detail the government’s obligations under a number of PSAs to facilitate the procurement of any permits by the investor and investor’s contractors. It is important to bring for public discussion the option for investor to sell the entire profit resource and receive the cash equivalent of the portion of profit hydrocarbons due to the government, and also, the related risks for the government. A clarified publication of essential terms of, and abstracts from, PSAs is necessary.
During the MSG meeting, Olha Polunina also made an overview of international experience in the disclosure of PSAs.
The MSG was established for the purpose of implementing the Extractive Industries Transparency Initiative (EITI).
The EITI is an independent standard voluntarily maintained at international level, being implemented in more than 50 countries of the world including Ukraine. In order to implement this standard and pursuant to the Ukraine-EU Association Agreement’s requirements concerning reporting by extraction companies (Directive 2013/34/EU), the Extractive Industries Transparency Law was passed in 2018. Presently, the Verkhovna Rada is deliberating on the draft law 3790, aimed to promote greater transparency of the extractive sector and implement anticorruption approaches, particularly through the requirement to disclose extraction contracts.