On December 1, 2023, after completing all the necessary technological procedures, the Sakhalin oil and gas condensate field completely stopped producing natural gas and gas condensate.
The reason for such measures is the decision of the Sixth Administrative Court of Appeal of Ukraine, which revoked the special permit for subsoil use No. 6349 dated July 10, 2019.
The panel of judges composed of Vidychenko T.R., Alimenko V.O. and Kuzmyshina O.M. upheld the appeal of the State Service of Geology and Subsoil of Ukraine: it canceled the order of the State Service of Geology and Subsoil of Ukraine No. 204 dated June 27, 2019 "On Granting Special Permits for Subsoil Use" and revoked the special permit for subsoil use No. 6349 dated July 10, 2019, according to which PrJSC MC Ukrnaftoburinnya carries out its activities for hydrocarbon production at the Sakhalin gas condensate field.
Why does PrJSC MC Ukrnaftoburinnya believe that this decision is unreasonable and carries risks not only for the company's operations but also for the sustainable passage of the 2023/2024 heating season?
Because the Sixth Administrative Court of Appeal of Ukraine canceled the order of the State Service of Geology and Subsoil of Ukraine and revoked the special production permit by reversing the execution of the court decision in administrative case No. 2a-7778/09/2670 without proper legal grounds.
However, the decision of the District Administrative Court of Kyiv dated September 03, 2009 in case No. 2a-7778/09/2670, which has now been reversed by the appellate instance, concerns the issuance of another special permit - No. 5139 - which was already revoked by the State Service of Geology and Subsoil in 2019.
The chronology of events is as follows:
- On February 5, 2010, pursuant to the ruling of the District Administrative Court of Kyiv dated September 3, 2009 in case No. 2a-7778/09/2670, the State Service of Geology and Mineral Resources issued Ukrnaftoburinnya a special permit for subsoil use No. 5139;
- On May 10, 2019, Ukrnaftoburinnya applied to the State Service of Geology and Subsoil of Ukraine with a request to issue a new special permit in connection with the expansion of the Sakhalin field development;
- The special permit No. 5139 dated 05.02.2010, which was subject to the court decision of 2009, was revoked by the order of the State Service of Geology and Subsoil No. 221 dated 10.07.2019 in accordance with paragraph 1 of part one of Article 26 of the Subsoil Code of Ukraine;
- On 10.07.2019, the company received a new special permit No. 6349.
Granting a new special permit is a new transaction, it is neither a re-issuance, nor a change, nor an extension of the previously granted permit.
The case was considered at the request of the State Service of Geology and Subsoil of Ukraine to reverse the execution of the court decision. The lawyers of PrJSC MC Ukrnaftoburinnya formed a clear legal position. In the first instance, the State Service of Geology and Subsoil of Ukraine was denied on 9.08.2023 by the decision of the Kyiv District Administrative Court.
Derzhgeonadra filed an appeal. The company presented arguments and objections in the appellate instance based on the same legal position.
Unfortunately, the appellate court did not examine the arguments of PrJSC MC Ukrnaftoburinnya, disregarded a number of arguments and granted the application for reversal of the court decision.
According to the company, the decision is unreasonable and not based on the requirements of the Law.
Thus, by canceling the new special permit, although the case concerned only the old one, the court stopped gas production by a company that is one of the 5 largest private gas producers in the country, which is fighting for energy independence after having jumped off the aggressor's "gas needle".
Moreover, for the first time in the history of its independence, Ukraine is now trying to get through the heating season using only domestically produced gas.
There is a war going on, and every cubic meter of gas, ton of condensate or oil produced, every hryvnia of tax for the budget of the state with a destroyed economy is simply vital.
In the case of PrJSC MC Ukrnaftoburinnya, we are talking about about 500 million cubic meters of natural gas per year!
It is worth recalling that the initiative of the State Service of Geology and Subsoil of Ukraine hit the company whose corporate rights were arrested and, according to the Order of the Cabinet of Ministers of Ukraine, transferred to the management of the state-owned company PJSC Ukrnafta by ARMA precisely to avoid a crisis in the natural gas market.
That is, on the one hand, the state is trying to use the assets efficiently, and on the other hand, certain officials and representatives of the judicial system are creating the very crisis situation when the company is forced to mothball gas wells in the midst of the heating season.
In addition, the revocation of the special permit deprives PrJSC MC Ukrnaftoburinnya of the opportunity to carry out economic activities and, accordingly, to receive profits, 90% of which should be directed to ARMA (the State Budget of Ukraine) to fulfill the management agreement for the said asset.
The Sixth Administrative Court of Appeal of Ukraine, by revoking the order of the State Service of Geology and Subsoil of Ukraine No. 204 of June 27, 2019, effectively deprived not only PrJSC MC Ukrnaftoburinnya, but also other companies, such as JSC Ukrgasvydobuvannya, JSC Turboatom, KP Trostyanets-Komunservis, KP Oblavodokanal of Zaporizhzhya Regional Council, LLC Karpatnadra, and others - this is not a complete list.
The company received the decision of the Sixth Administrative Court of Appeal on November 29, 2023.
Since the shutdown of production is a complex process, a special regulation was developed on an emergency basis to protect the environment and preserve the company's technological processes.
On November 30, 2023, pursuant to the court ruling, an order was prepared and put into effect approving the safe shutdown of production at the Sakhalin field.
On December 1, 2023, PrJSC MC Ukrnaftoburinnya took all the necessary technological measures and was forced to comply with the requirements of the legislation prohibiting hydrocarbon production activities without a special subsoil use permit, which was revoked by the decision of the Sixth Administrative Court of Appeal.
It is worth noting that the company's technological communications provide gas supply to the village of Kitchenkivka, Kharkiv region. There is currently no other technical possibility to provide gas to the residents.
Currently, PrJSC MC Ukrnaftoburinnya is filing an appeal to the cassation instance - the Supreme Court, and is urging the Cabinet of Ministers of Ukraine and the Office of the President of Ukraine to pay attention to this case.
In addition, the company expects conclusions from the competent law enforcement agencies regarding the situation that directly undermines Ukraine's energy independence during the war.
.png)