You're reading: Ukraine ups payment for gas production to 25% of cost

The Ukrainian parliament has adopted a law envisaging increased payments for gas production (including non-traditional) from a depth of up to 5km from 17% to 25% of its cost and for depths of over 5 km from 9% to 14% of cost.

The bill was passed Thursday by 262 deputies.

Payments for offshore gas production are going down to 11% from 15% of cost.

When producing gas from a depth of up to 5 km and then selling it on for the population the payment for production drops from 28% to 20% of cost and for depths of over 5 km from 25% to 14%.

When developing fields on product sharing agreements (PSA), payments will be 2% of the cost of oil and 1.25% of the cost of gas produced.

The law states that in some cases correction coefficients will be used in the rate for production. Thus, when producing off-balance gas reserves a correction coefficient of 0.96 will be applied and for off-balance oil and condensate reserves it will be 0.95.

In similar cases but with the subsequent sale of gas for the population, the correction coefficient will be 0.79 or 0.61 (offshore fields).

When producing gas from sites approved on the basis of geological studies, carried out at the expense of the producer, the correction coefficient shall be 0.97 and 0.96 for oil and condensate.

In similar cases but with the subsequent sale of gas for the population, the correction coefficient will be 0.88 or 0.77 (offshore fields).

To calculate payment for gas production the average customs cost of imported gas per month, or National Electricity Regulation Commission tariffs (when gas is sold to the population) will be used.

The Ukrainian Economic Development and Trade Ministry should on a monthly basis by the tenth of the month publish the average customs cost of imported gas for the previous period.

The law lifts fines for late payment of advance payments for subsoil development.

The law comes into effect the day after its publication. However, rules affecting subsoil resource payments will come into effect on January 1 2013.

Current payment for subsoil development is Hr 147.63 per tonne of oil and condensate and Hr 42.05 per 1,000 cubic meters of gas (regardless of depth of production).

The Ukrainian president on June 22 signed a law on introducing changes to the Tax Code regarding improvement of several tax regulations, eliminating rent payments and changing the system for levying payments for the use of subsoil resources when producing hydrocarbons from 2013.

The law will from January 1 2013 raise the payment on use of subsoil resources when producing oil (condensate) form a depth of up to 5 km to 39% of its cost and to 17% of its cost for greater depths.

The law aimed to increase payments for gas production (including non-traditional) from a depth of up to 5 km to 17% of its cost, and for a depth of over 5 km to 9% of its cost. If gas is produced offshore the payment was planned at 15% of cost.

It was also proposed that the payment when producing gas for subsequent sale for the population would be 28% of its cost for depths of up to 5 km and 25% for greater depths.