Rinat Akhmetov's transfer of the most promising Ukrainian oil and gas field to DTEK's development proves the oligarch's growing influence on the current government.
Such a "union" does not bring anything good for Ukraine and Ukrainians, as the experience of the rule of previous presidents shows.
Battle of Budyshchansko-Chutivske field
The news that the State Service of Geology and Subsoil will issue a license for the development of the Budyshchansko-Chutivske field (Poltava oblast) to DTEK's Naftogazgeorozvidka LLC became known on August 31.
Naftogazgeorozvidka did not get the right to subsoil use for free: it won the e-auction, having agreed to pay $23.2 million.
The reserved price of the lot was $2.9 million and was thus 8 times exceeded.
Now R.Akhmetov's PR experts and DTEK managers seem to have reason to assert that undertaking with the state was absolutely market-based and that there is no talk of any "goodies" on the part of the authorities.
But it should be taken into account here that starting price of the license for the Budyshchansko-Chutivske field was several times lower than the real cost.
Judge for yourself. The development of the Budyshchansko-Chutivske field began in 2011 and it turned out to be the largest oil field discovered in Ukraine over the past 15 years.
On the eve of the auction, the Ukrainian State Geological Prospecting Institute called the Budyshchansko-Chutivske field "the most promising investment proposal with hydrocarbon accumulation over the last 10 years" – among all those put up for sale.
The proven reserves of the Budyshchansko-Chutivske field are at least 12.8 million tons of oil. Plus, there are gas reserves as well – 3 billion m3.
Taking into account the current world price for the benchmark Brent oil at $336.22/t with a decreasing coefficient for Ukrainian oil, we get a market value of $252.02/t.
Or $3.226 billion for all the oil that DTEK will be able to pump out of the Budyshchansko-Chutivske field.
Now let гs just compare this amount with the reserved price of $2.9 million and those $23.2 million, for which R.Akhmetov got the Budyshchansko-Chutivske field.
Of course, DTEK may remind that oil production involves certain costs and investments. And that there are also annual rental payments for subsoil use in addition to the license fee.
But even adjusted for this, the figures of $23.2 million and $3.225 billion in current prices turn out to be too incomparable.
Moreover, we do not take into account the cost of 3 billion cubic meters of natural gas, which DTEK receives together with the right to develop the Budyshchansko-Chutivske field.
It turns out that the Ukrainian state and its citizens were stiffed by smart men who have unhindered entry into the offices of high-ranking officials.
Therefore, the fact that the sale price of license for the Budyshchansko-Chutivske field is 8 times higher than the reserved one does not matter. It is still at least 10 times less than its real value.
It is only fair to say that not all the bidders were ready to fork out even for such an amount as DTEK.
Ukrnaftoburinnia private gas production company (associated with Ihor Kolomoyskyi's Privat group) offered $3.9 million, LLC Regal Petroleum Corporation (Ukraine) Limited (associated with Vadym Novynskyi's Smart Holding group) offered $9.9 million.
Meanwhile, PJSC Ukrnaftoburinnia state-owned company was ready to pay $23.2 million. That is, the result of the auction was decided by a completely "ridiculous" amount in this case – $17.8 thousand hryvnia…
So, R.Akhmetov took the cake.
It is worth enlarging a little more on how the state "faded". The fact is that initially, the rights to develop the Budyshchansko-Chutivske field were owned by the state-owned NJSC Naftogaz of Ukraine, which includes Ukrgazvydobuvannia.
Naftogaz began works on the Budyshchansko-Chutivske field since 2011, having drilled three wells, which showed the prospects for further industrial development of oil and gas fields.
In total, the state-owned company has invested over $26.7 in the development of the Budyshchansko-Chutivske field since 2011: drilling of wells was preceded by 3D-seismic, gravimetric, magnetometric and geochemical studies.
The NJSC has created complex digital hydrodynamic models of discovered fields and received confirmation of the assessment of reserves of discovered fields using the SPE-PRMS system.
In a word, it cannot be said that Naftogaz was lying on the Budyshchansko-Chutivske field like a dog in the manger.
Another thing is that the full-scale war in the Donbass in 2014-2015 and the related economic crisis adjusted the investment plans of the state-owned company.
It seems clear that we are talking about force-majeure circumstances for any business. Nevertheless, the State Service for Geology and Subsoil of Ukraine makes a very strange decision in 2017: it withdraws Naftogaz's license for the Budyshchansko-Chutivske field.
It is strange not only in view of the above-mentioned background. First of all, it is strange in itself: when the state takes the opportunity to earn money away from a state-owned company (read: from itself), it always evokes associations with some kind of corrupt practices.
It is true that in trying to achieve the cancellation of this strange decision, Naftogaz lost the State Service for Geology and Subsoil of Ukraine Geonedr in court battles.
Nevertheless, the NJSC issued an official statement on August 31, on the same day when Naftogaz Georozvidka won the bidding, having announced its intention to continue defending its rights to the Budyshchansko-Chutivske field.
But again, not everyone in the same Naftogaz is ready to defend the interests of the state-owned company and the state as a whole.
For example, former Deputy Energy Minister Natalia Boyko, who is currently a member of the supervisory board of Naftogaz, called the auctions held on August 31 "transparent and competitive".
She congratulated current chairman of the State Service for Geology and Subsoil of Ukraine Roman Opimakh on this. And she was glad in social networks that "a record amount was attracted to the state budget from a player in the private sector".
It is clear that it is quite difficult to expect the victory of the NJSC with such "representatives of state interests". And yet I am going to trust that the dot over i has not yet been put.
"Sweeteners" for $1.4 billion?
License for the Budyshchansko-Chutivske field in August was not the only "sweetener" from the state for R.Akhmetov and DTEK group belonging to him.
Closure of criminal proceedings against the Rotterdam+ formula was an equally significant case.
In accordance with it, specialists in energetics bought coal of Ukrainian production (most of Ukrainian coal production is concentrated in DTEK mines) at the price of imported coal, even with a surcharge for delivery to Ukraine from Rotterdam, where one of the world's largest coal exchanges is located.
It would seem to be so simple: the buyers were selling coal at an exorbitant price – after all, no one actually carried it from Rotterdam to Ukraine.
The decision to implement the Rotterdam+ formula was made by officials of the National Energy and Utilities Regulatory Commission (NEURCU) – who caused economic damage to ultimate customers of electricity that way, including state-owned enterprises and government agencies.
Even if it is not possible to prove the corrupt interest of officials in this formula (no one was caught with a sack of money red-handed) – at the very least, we are talking about the neglect of duty, which entailed grave consequences.
Calculating the damage from coal purchases by specialists in energetics at inflated prices should not be difficult either: it is enough to find out how much the real cost of coal production was in 2015-2019. And how much did the ultimate customers overpay – since the price of coal is included in the bulk rate for the production of electricity by thermal power plants.
But everything turned out to be very difficult in fact. The National Anti-Corruption Bureau of Ukraine (NABU) opened criminal proceedings against Rotterdam+ back on March 24, 2017.
For example, the difficulties with the investigation during the presidency of Petro Poroshenko can be understood: according to the media reports, the ICU investment company, which serves Poroshenko's business, received financial benefits from Rotterdam+.
But the government has changed in Ukraine more than a year ago, – and it was still not possible for the NABU to complete the investigation of the case and send it to the court.
However, the NABU seemed to have completed all the necessary investigative steps a year ago and presented a scheme to the public, according to which the losses were inflicted on consumers through the inflated cost of coal – most of which was mined and sold by DTEK.
It is clear that the other side also did not sit twiddling its thumbsy, including in the media space.
So, the media reported in early August about the alleged lack of proven damage in the Rotterdam+ case.
Then the NABU made a rebuttal – claiming that the damage from Rotterdam+ only for 2016-2017 is estimated by state examiners at $641.6 million, and for the entire period of the formula – at $1.4 billion.
Nevertheless, it followed from the statement that the investigation did indeed have some problems.
It noted that adjudication of the correctness of determining the amount of all damage is still ongoing.
It was also reported that the NABU made inquiries to foreign jurisdictions within the framework of the investigation.
It seems clear that just before receiving answers to these inquiries (and you can wait for them for a whole year), the Specialized Anti-Corruption Prosecutor's Office (SAPO) suspended the investigation into Rotterdam+.
But of course, suspension of the investigation does not mean closure of the criminal case, as some media rushed to announce in early August.
Meanwhile, the criminal proceedings on Rotterdam+ were actually closed on 28 August by the SAPO decision.
Prosecutor of the SAPO Vitaliy Ponomarenko, who supervised the investigation, explained that the comprehensive expert examination did not confirm the existence of damage from Rotterdam+.
And this is quite strange: consumers paid for the transportation of coal from Rotterdam to Ukraine, which was not actually done – and no damage? How come?
Apparently, V.Ponomarenko spoke about the total figure of $1.4 billion, according to which the NABU falsely implied the existence of problems.
But there again, there is no reason not to believe the NABU, which claims that the experts have confirmed the damage of $641.6 million.
Then the question arises: why the fully proven episode worth $641.6 million was not allocated to a separate proceeding, the indictment of which can be submitted to the court even today?
Moreover, statement of the NABU of August 28 said the following: "The investigation of this case was at the closing stage, the detectives collected all the necessary hard evidence to send it to court and prove the guilt of the suspects".
And for the entire amount of $1.4 billion, disputes with experts and prosecutors of the SAPO could continue.
In turn, defense lawyer Artem Trekke stated that the conclusion of a comprehensive expert examination of the Security Service of Ukraine in the Rotterdam+ case, which did not determine damages from the formula, left the investigation no other option but to close the case for the lack of corpus delicti.
A.Trekke stressed that the defense party insisted on the absence of any losses from the operation of this formula from the very beginning, its economic and legal justification and, accordingly, the groundlessness of all accusations by the NABU.
Nevertheless, the NABU announced its intention to appeal against the SAPO decision to close the criminal proceedings against Rotterdam+.
But as in the Naftogaz dispute over the Budyshchansko-Chutivske field - there are no special illusions about whose interests will be of higher priority for high-ranking officials: of the state and its citizens, or the interests of one particular oligarch and his business.
Vitaliy Krymov, OstroV