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Ukraine oil and gas companies oppose tax hikes

July 30, 2014, 11:45 UTC+3 KIEV
If the law aimed to replenish the state budget is adopted the burden on private oil and gas companies will sharply increase, projects will become less profitable, the companies says
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© EPA/SERGEI CHIRIKOV

KIEV, July 30. /ITAR-TASS/. Ukraine government plans to increase taxes on oil and gas sector can halt private gas production development, goes open letter of Ukrainian companies.

Independent oil and gas companies Poltava Petroleum Company, Geo-Alliance, Smart Energy, Burisma, Kub-gas, Tisagaz and Naztogazvidobuvannya addressed Prime Minister and heads of Verkhovna Rada committees after analyzing the bill to be considered in the parliament on Thursday.

If the law aimed to replenish the state budget is adopted, the letter goes, the burden on private oil and gas companies will sharply increase, projects will become less profitable, which can lead to closing because of margin losses and overall decline in Ukrainian oil and gas market appeal for foreign investors.

“The draft law will increase tax rates for use of resources to the levels unseen in Europe”, 70%, the companies said, whereas tax rate on hydrocarbon production in other gas importing European countries did not exceed 20%

Independent companies will need $300-500 million alone to maintain the current production, goes the address. Increased tax burden “will inevitably stop capital flow to the sector”. Private oil and gas companies will “be unable to finance exploration and production and drilling of new wells”, which “will inevitably halt the sector’s development”, the companies said.

A radical revision of oil and gas market rules will “wind up the projects realized by foreign investors”.

“Investors can leave for neighbouring markets - Poland, Romania and Turkey that compete with Ukraine,” goes the letter.

Last Friday, the bill did not garner support even to be included on the plenary meeting agenda.

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