Asters and EY Held a Seminar on Production Sharing Agreements in Ukraine: Current Realities and Prospects

On May 14, 2015 International Company EY and Law Firm Asters held a joint seminar dedicated to production sharing agreements in Ukraine: realities and prospects for the leaders and experts of private and public oil-and-gas companies.

The seminar dealt with the basic legal and tax advantages on production sharing agreements ("PSA") and practical aspects of conversion of special permits for subsoil use and joint activity agreements ("JAA") into PSA. The seminar was attended by approximately 35 representatives of the leading players in the oil-and-gas sector.

Yaroslav Petrov, a counsel with Asters highlighted the legal aspects of PSAs and their benefits, including: freedom of contract and extension of rights of a subsoil user; prolongation of subsoil use term, non-interrupted special permits for exploration and production; government assistance in obtaining permits; pricing and disposal of hydrocarbons; investment protection and dispute resolution in international arbitration.

Albert Sych, a partner and head of legal practice with EY, and Irina Kalyta, a director of the tax department with EY, described the benefits of PSA in taxation, exchange controls, import-export transactions under the PSA, including outlining the issues of optimization of the rent payments; automatic VAT reimbursement; compensation of investments; privileges in exchange control and in the export and import issues; guarantees for the "stabilization" in the legislation.

Also, organizers touched upon the issue of conversion of special permits and JAAs into PSA, particularly the process of conversion; shortcomings in the procedures and necessary amendments to the Law "On Production Sharing Agreements"; consideration of the possibilities of "historical" costs after conversion of special permits and JAAs into the PSA, and organizational issues of PSA execution. In the discussion of such issues, also joined Volodymyr Ignashchenko, an expert in the PSA. The issues of structuring of any "converted" PSAs were also not left unattended.

After the main program of the seminar the participants had an active discussion with speakers.