Ukraine needs foreign investment, particularly in the energy sector – this mantra is repeated time and again by the authorities. Proven natural gas reserves of more than 1 trillion m³ and government plans to boost gas production to 27bn m³/yr in 2020 from the current 19.9bn m³/yr should draw the eye of investors. The obstacle is decisions made this week in parliament that militate against a healthy investment environment in the sector.
Parliament’s tax committee rejected a draft law to decrease subsoil taxes for gas producers for new wells to 12pc from a current 28pc of the price of gas sold. The decision was a bitter blow to gas producers who lobbied for the new tax rates over several months. “We failed to prove for foreign investors that Ukraine is a good place to invest in gas production and we are left on the world map as a country with one of the highest tax rates for gas production”, said head of Ukraine’s association of gas producers Daniel Maydanik. The tax committee argument that there might be a loss of state revenues was weak, given that producers asked for low rates only for future wells. Besides, the committee approved a drop in tax rates for crude production that will lop 2bn-3bn hryvnia ($76.5mn-$114.8mn) off the 2017 budget. Continue reading