New Rounds of Subsoil Use E-Auctions in 2020

Ukraine’s subsoil use sector has undergone a significant transformation and major development in recent times. In 2019, for the first time in several years, auctions for the sale of special subsoil use permits and tenders for production sharing agreements (“PSAs”) for numerous oil and gas fields were conducted.

In December 2019, the Investment Atlas of Subsoil Users was presented, with over 100 investment-ready facilities. Included in the list were 23 prospective oil and gas deposits with an area of more than 3,500 km2.

Having considered the regulatory deficiencies and previous poor results in holding subsoil use auctions, Ukrainian authorities have made necessary steps which promise to deliver tangible progress in 2020 and beyond.

Thus, on 19 December 2019, the Ukrainian Parliament adopted the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on Improvement of the Legislation on Extraction of Amber and Other Minerals” No. 402-IX (the “Law on Improvement of Mineral Extraction”), which introduced significant changes to the Law “On Production Sharing Agreements”, the Subsoil Code, the Land Code and other legislative acts. Among other things, the Law on Improvement of Minerals Extraction has:

  • Simplified the issue of subsoil use permits and land access required for subsoil activities;
  • Moved the requirement for an environmental impact assessment (the “EIA”) ahead and it will now be conducted only after the PSA has been executed. Previously, the draft PSA was subject to an EIA before its execution;
  • Introduced electronic bidding for auctions on the sale of special permits for subsoil use. Therefore, all auctions for issuing special permits shall be held only through the online public procurement platform ProZorro.

In accordance with the Law on Improvement of Mineral Extraction, on 19 February 2020, the Cabinet of Ministers of Ukraine (the “CMU”) amended the Procedure for Issuance of Special Permits for Subsoil Use (the “Procedure for Subsoil Use”) by Resolution No. 124 and set it out in a new version. The main changes to the Procedure for Subsoil Use include:

  • Expanding the list of types of subsoil use for which a special permit can be obtained, namely: geological exploration of amber, including experimental-industrial development of fields with subsequent extraction of amber;
  • Eliminating the need to obtain approval from local councils for the issuing of special permits for exploration and development of mineral deposits of national significance and for other purposes not related to the extraction of minerals;
  • Amending the list of cases for obtaining special permits without an auction. The option for obtaining a special permit without an auction when entities have conducted exploration of minerals at their own cost and approved their estimates with the appropriate authorities is no longer available;
  • Opportunity to submit application documents for obtaining or renewing a special permit in electronic form via the online account of the subsoil user on the website of State Service of Geology and Subsoil of Ukraine.

Announced dates of auctions in 2020

III auction – 06 July 2020;

IV auction – 17 July 2020;

V auction – 31 August 2020.

Special permits for the use of subsoil areas which are placed on auction III, which will take place on 06 July 2020

(Source: State Service of Geology and Subsoil of Ukraine — III)

Special permits for the use of subsoil areas which are placed on auction IV, which will take place on 17 July 2020

(Source: State Service of Geology and Subsoil of Ukraine — IV)

Special permits for the use of subsoil areas which are placed on auction V, which will take place on 31 August 2020

(Source: State Service of Geology and Subsoil of Ukraine — V)

 

Hillmont Partners offers the following legal services for Extraction Industry Businesses:

  • Legal assistance in obtaining Special Permits for Subsoil Use via auction sales and non-auction procedures;
  • Risk Assessment (legal and regulatory) of the Special Permits offered at Auction Sales;
  • Liaison with authorized bodies. Receipt of a reasoned opinion on the environmental impact assessment;
  • Assisting and advising on the receipt of approval for commencement of the planned activity under the awarded Special Permit;
  • Compliance (regulatory policy and stakeholder support) with Extraction Industry Requirements.