Questions remain about ownership of energy company that Yulia Tymoshenko tried to stop from Black Sea exploration.
Billionaire Rinat Akhmetov sought to boost his stake in a potentially lucrative Black Sea oil and natural gas exploration project, former U.S. Ambassador William Taylor wrote in a cable published earlier this month by whistleblowing website WikiLeaks.
Akhmetov, a longstanding supporter of President Viktor Yanukovych, would have gained at least a 50 percent share in a company, which in 2006 won the right to explore nearly 13,000 square miles of the Black Sea shelf.
The size of some small European countries, the territory is one of the single largest ever doled out by a nation for exploration and production. It is believed to be one of the region’s last untapped reserves of hydrocarbons that could be easily unearthed and brought to market.
By the time this issue of Kyiv Post went to print, Akhmetov’s press service hadn’t responded to requests for comment. It remains unclear whether Akhmetov, Ukraine’s richest man, ever went ahead with his plans to gain a majority stake in the project.
Bidding in partnership with an investment firm owned by a member of the Rothschild family (Nathaniel Rothschild), a subsidiary of Vanco Energy, the Houston-headquartered energy company, won the rights over the project during a 2006 tender. It outbid energy majors such as Royal Dutch Shell ExxonMobil.
But government officials dragged their feet on the project; the Rothschild firm exited. Vanco Energy stayed in with a minority stake. Ownership over the project was transferred to a British Virgin Islands registered company, Vanco Prykerchenska.
Akhmetov’s DTEK energy holding, along with two companies that are allegedly controlled by other oligarchs ended up with a controlling stake.
To this day, mystery surrounds ownership over the strategically important project which was intended to decrease Ukraine’s dependency on costly Russian energy imports.
Citing the lack of transparency, Yulia Tymoshenko as prime minister in 2007-2010 tried to revoke the deal. But with her exit from power, the deal is likely to be put back on track.
According to Taylor, who left his Ukraine post in 2009, his conversation with Akhmetov took place on Oct. 8, 2008. During the talks, Akhmetov talked about his plans to buyout another quarter stake in Vanco from another shareholder, Shadowlight Investments.
Officially, DTEK, an energy arm of Akhmetov’s System Capital Management holding company, controls 25 percent of Vanco. It’s less clear whose interests might be behind other shareholders – an obscure Austrian company, Integrum Technologies, and Shadowlight. Each of them owns a quarter stake.
According to a Jim Bown, a U.K. citizen who acts as president of Vanco Prykerchenska, Shadowlight is owned by Russian businessman Yevgeniy Novitsky, a board member of Sistema Corporation, one of the largest Russian business groups. It controls mobile phone giant MTS.
Yet insiders and experts think that Novitsky could be a front man, representing the interests of other beneficiaries.
Bown wouldn’t comment on the relationships between Vanco shareholders, noting only that he’s not aware of any changes in the company’s ownership structure.
At the same time, Akhmetov was very enthusiastic when the ambassador suggested that an international oil and gas company “might be interested in joining the deal.” He called this suggestion an “excellent solution.”
As Taylor writes in the cable, Akhmetov immediately offered his assistance in transferring shares belonging to Shadowlight to a new investor.
Dmytro Marunych, head of the Kyiv-based Energy Studies Institute and a former spokesperson for state oil and gas company Naftogaz, said the lack of transparency in Vanco’s ownership structure is one of the project’s major problems.
And this, he said, is likely keeping at bay the hundreds of millions of dollars of investment that is needed to proceed with the promising and strategically important deep-water exploration project.
“This semi-shadowy situation regarding Vanco Prykerchenska [beneficiary] owners is bound to scare away the investors,” Marunych said. “None of the companies that currently hold the stocks can afford to invest hundreds of millions that will be necessary.”
As prime minister in 2007-2010, Tymoshenko moved to revoke the agreement with Vanco Prykerchenska. But since Viktor Yanukovych narrowly beat her in a 2010 presidential contest, Ukraine’s government has announced plans to ink a peace agreement with Vanco, de facto renewing the project with its alleged murky ownership.
This April, the text of amicable settlement was approved by the government, but, according to Bown, it still hasn’t been signed.
Edward Chow, an energy and national security expert at Washington-based Center for Strategic and International Studies has advised Ukraine on energy issues in the past.
He said that the Black Sea exploration tender symbolized other problems that have been plaguing Ukraine for the last two decades, curbing the inflow of foreign direct investment.
“The tender process for the offshore block was fundamentally flawed from the beginning in 2005 and fell well short of minimal international standards of transparency and open competition,” Chow said.
“As a result, it did not attract strong bids from interested and capable international oil companies in spite of initially strong industry interest. Complications from the award of the block have delayed exploration for five years.
“So, all in all, this was a huge missed opportunity for Ukraine,” Chow concluded.
Kyiv Post staff writer Vlad Lavrov can be reached at [email protected].
