Andriy Bohdan, chief of staff for President Volodymyr Zelenskiy, has urged to postpone a tender on offshore gas extraction in the Black Sea, according to a letter he sent to the Cabinet of Ministers on June 3 and revealed by Ekonomichna Pravda on June 11.
The tender looks for firms that can set gas production in the Black Sea and secure Ukraine’s complete energy independence from Russia. The application call for the tender lasted for two months and is due today, on June 12.
In the letter, Bohdan is asking the government to extend the tender by 120 days. He believes two months is not enough for such a “large-scale project” and there should be more time for other gas production companies to apply, especially for foreign ones.
“A two-month term is absolutely not enough to prepare quality applications and thus ensure competition,” Bohdan said in the letter. “This makes it impossible for big international players to participate because they don’t make investment decisions in such short terms.”
The offshore territory suitable for gas extraction stretches along the Black Sea’s Ukrainian shelf for 9,500 square kilometers with Odesa being the closest city. According to experts, untapped natural gas reserves in this area could boost Ukraine’s current gas production by at least 5 billion cubic meters per year, or about 25 percent of the country’s current total output.
Roman Opimakh, executive director of the Association of Gas Producers of Ukraine, said that the two-month term was too short for a fair competition when commenting on the issue to Radio Free Europe: “Everywhere in the world, the term is from four to six months. Two months for a serious player is an (unrealistic) term.”
Energy Minister Igor Nasalyk, who is also the head of the tender, will not reveal the names of companies that have applied for the tender, according to investigative journalists from Schemes, a project by Radio Free Europe. The only information that Nasalyk has expressed is that at least two foreign companies have submitted their applications — Frontera Resources and Trident Acquisitions.
Although foreign, both companies have mixed reputations.
According to the investigative journalists, Frontera Resources initiated the gas tender and has shady and unsustainable projects in Moldova and Georgia. The company’s financial reports for 2017-2018 indicate that it is unprofitable.
Bohdan calls the company “little-known” and claims its projects are “frozen.”
Another named participant, Trident Acquisitions, is managed by Ilya Ponomarev, an exiled former Russian member of parliament who just recently received Ukrainian citizenship. Ponomarev has advocated strongly for Ukraine and for its offshore gas extraction since he permanently left Russia in 2014. He says that almost 90 percent of Trident Acquisitions’ funds come from U.S. investors and the remaining from Western Europe.
Nasalyk sees no point in extending the deadline. He claims there are already serious contenders, apart from Frontera Resources and Trident Acquisitions but wouldn’t provide names.
“The problem will be with having too many (contenders), not too few,” he told Radio Free Europe.
Bohdan says that the two-month term was chosen to “created a barrier” for foreign firms and “to quickly give away strategically important gas territories to (inner-circle) people” during Ukraine’s most recent presidential elections. Postponing the deadline for the tender, in turn, will lure more international firms, thus increasing transparency and competitiveness, he wrote in the letter.
However, on June 12, the Energy Ministry revealed the names of two other companies that had applied for the tender: Ukrnaftoburinnya and Caspian Drilling Company.
Caspian Drilling Company is a firm that belongs to State Oil Company of Azerbaijan (55 percent) and U.S. GlobalSantaFe Corporation (45 percent). Over 15 years of its existence, the company has drilled at 30 deep water locations — all in Azerbaijan.
Oil developer Ukrnaftoburinnya, in turn, belongs to Ukrainian oligarch Ihor Kolomoisky as well as Vitaly Homutynnik, leader of the political party Renaissance, Pavlo Fuchs, a Russian-Ukrainian businessman. It is one of the three largest private gas production companies in Ukraine, according to Schemes.
Kolomoisky had business ties with President Volodymyr Zelenskiy through 1+1 Channel, one of Ukraine’s most popular TV channels that is owned by the oligarch. Until recently, Bohdan was Kolomoisky’s lawyer representing him in some of the oligarch’s most important lawsuits including the PrivatBank case in which Kolomoisky’s has been accused of a $5.5-billion bank fraud that lead to the collapse of PrivatBank, one of Ukraine’s largest banks. The bank was previously co-owned by Kolomoisky before it was nationalized in 2016. Kolomoisky denies any wrongdoing.
