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DiXi Group prepares a brochure about PSA sites for local authorities

27 August 2021

The possession of exhaustive information about the scope and nature of planned operations allows bodies of local self-government and the broad public to objectively assess the situation and build a constructive dialogue

DiXi Group prepared a brochure for local authorities, featuring information about seven production sharing agreement (PSA) sites, which could be of interest to the bodies of local self-government and civil society in PSA implementation regions. This brochure can be downloaded here.

“Development of oil and gas fields can cause discomfort for the residents of nearby localities (including noise from drilling rigs, regular truck traffic flows on the local roads, the impact on groundwater and so on), affect the environment and the local socioeconomic development. Therefore, the locals take, as a rule, keen interest in operations of extractive companies. This brochure has the purpose of disseminating information about new extraction sites to be developed under production sharing agreements (PSAs) among the bodies of local self-government and the residents of regions where extraction operations take place, raising their awareness and enhancing their capability to influence decision making, and enabling strategic planning in the territory of the communities concerned,” the brochure says.

It is worth reminding that in December 2018, the resolutions 1178 to 1189 of the Cabinet of Ministers of Ukraine announced a tender for geological survey and extraction of hydrocarbons on 12 sites under production sharing agreements (PSAs). On 31 December 2020, the Energy Ministry signed seven PSAs for development of the following sites: Balakliiska, Berestianska, Buzivska, Ivankivska, Sofiivska, Uhnivska and Zinkivska. The essential terms of, and abstracts from, the PSAs for these sites were published in May 2021.

Our brochure contains maps of the PSA sites, information about the area of these sites (compared with various geographic objects), about investor companies including their contact info, the numbers and expiration dates of special extraction permits issued to them, the list of resources to be extracted under PSAs, the minimum scope of work and amount of investment at the stage of geological survey, the investors’ social obligations under PSAs, stated in the essential terms, and the availability of environmental impact assessment procedures for the planned operations.

As a result, bodies of local self-government will be able to learn the validity period of special extraction permits and take this information into account when preparing long-term community development strategies and local socioeconomic development plans, for example, as regards the use and restoration of local infrastructure, employment of the local residents, implementation of environmental initiatives, etc. Our document also contains environmental impact assessment (EIA) reports, cited in reference tables for the PSA sites, allows to identify problematic points and submit reservations as part of public discussions (even though public discussions are suspended for the duration and within the area of quarantine imposed to prevent the spread of СОVID-19, reservations and proposals can be submitted in written, including electronic, form).

“It is also important for bodies of local self-government to know that the rent for hydrocarbons produced at PSA sites is paid at a discounted rate (paragraph 252.20 of the Tax Code of Ukraine), and therefore, the percentage of revenues remitted to the community’s budget will be lower. The procedure of calculating the value of production output, which serves as the basis for rent assessment, has not been fully disclosed in the essential terms of, and abstracts from, the PSAs that were made public. Therefore, it is presently impossible to estimate rent revenues to the local budgets, or to forecast the production outputs for the PSA sites,” DiXi Group points out.

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