Fuel and Energy

13/ 02/ 2015

Among a number of amendments to legislation introduced recently by CMU Resolution “On Certain Issues of Deregulation of Economic Activity” №42 of January 28, 2015, the need for monitoring and scientific support of implementation of specific provisions of subsoil use was cancelled. The procedure was intended to provide subsoil scientific advice and expert recommendations on effective and rational use of subsoil by specialized state-owned enterprises.

Background: Members of the Association for years voiced the need to abolish requirements for monitoring and scientific support of subsoil usage. This requirement created a lot of prerequisites for abuse and was a heavy financial burden on the oil and gas sector because of the ambiguity of the legal regulation of this issue. In particular, the cost of such monitoring and scientific support was not defined in any legal act and was established without specifying the calculation methods in the relevant contracts between subsoil users and specialized state geological enterprises and organizations. The signing of this agreement actually deprived subsoil users any possible discussion of its terms, including the commercial aspect.

According to the experience of some members of the Association, the cost of monitoring and scientific support was significant (millions of hryvnas per company) and in recent years was systematically increasing without proper reasons. Moreover, it was actually duplication of controlling functions of the state through various state bodies, but also was an example of funding the controlling functions of the state not from the budget but from direct payments of subsoil users, which is unprecedented.

The European Business Association welcomes changes concerning the elimination of the provision of monitoring and scientific support of subsoil use and special conditions performance from CMU Resolution No615 of May 30, 2011 as it aims at minimize corruption risks in the sphere of subsoil use and increases the investment attractiveness of Ukraine in the eyes of potential investors.

We thank all members of the Association and government authorities who participated and supported our efforts regarding this issue. At the same time, the Association will continue our work on improving the business climate in Ukraine.

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