Acting chairman of the board of Ukrnafta Oleh Hez said that the company turned to the government and the President with the proposal to introduce tax holidays, or temporary changes to the Tax Code due to falling demand for oil. This was reported by the press service.
Oleh Hez pointed out two main factors that the company is suffering from: a drop in demand for petroleum products due to the coronavirus pandemic and record low oil prices in the world.
“Due to restrictions on movement due to quarantine measures, the company expects a reduction in the consumption of petroleum products at the level of 15-20%. At the same time, Urals crude oil prices (the main indicator for selling oil of Ukrainian origin) fell to the level of $19-23 per barrel, which is significantly lower than the total cost of Ukrnafta oil, taking into account the rent and other payments to the budget”, the message says.
The company also noted that even before the fall in prices, Ukrnafta had accumulated about 420 thousand tons of oil and condensate (production in December-March), which it could not sell at state auctions because the starting prices set by the state did not correspond to the market level and buyers refused to buy raw materials.
Under such conditions, the production activities of Ukrnafta become unprofitable, and the company faces a financial collapse and a halt in production.
Ukrnafta offered the Government to consider and decide on the introduction of “tax holidays” for oil and gas companies to pay rental payments by the end of 2020 or to amend the Tax Code, which would temporarily reduce the rental rates for oil and condensate from the current 31% to 6%.
It is also said that an alternative may be the fulfillment by the state in the person of Naftogaz of Ukraine of a debt for the purchase of unsold oil and condensate at auction prices that did not take place.
“Naftogaz’s obligation to buy oil and condensate that were not sold at state auctions is directly stipulated by the Law of Ukraine “On Oil and Gas” but it is not systematically fulfilled”, the company notes.
The company also talks about the need to solve the problem of non-market starting prices at state auctions for the sale of oil and condensate.
In 2019 the company was not able to sell a quarter of oil.
Earlier it was reported that in late February, Ukrnafta was not able to sell raw materials at an auction because of the lack of buyers.
Tags: The Cabinet of Ministers, Naftogaz, contracts, oil, hydrocarbon production, legislation, Top management, energy market, Ukrnafta, добыча нефти, drilling, коронавирус, Зеленский, taxes, debt, stocks, oil products, oil deliveries, parliament, auctions, infrastructure, energy sector, Shmyhal, quarantine, pandemia