Today, on December 28, the Concept for Development of Ukraine's Gas Production Industry by 2020 was approved during the Government meeting.

The key goal outlined in the Concept is increasing domestic gas production to 27 bcm by 2020, which will allow to enhance the energy security of the country and will decrease Ukraine's dependence upon imported natural gas. To remind, currently imported natural gas provides for as much as 40% of domestic consumption (33.8 bcm in 2015).

The main goal of increasing production is attracting investments and use of modern technologies. To perform the plan to produce 27 bcm, the capital investments should be doubled to an average of $1.3 billion invested in the industry annually over the course of 4 years. Almost half of the natural gas in 2020 should be produced from new wells on brown- and greenfields, as well as from enhancements of production.

In particular, the state-owned Ukrgasvydobuvannya is planning to invest 110 billion UAH over the course of 5 years, thus increasing production to 20 bcm. At the same time, the Government expects the private gas producers to attract $1 billion of investments in 2016-2020, and increase gas production to 7.3 bcm.

According to the Association's estimates, approximately 375 fracking operations should be performed and 965 wells should be drilled (465 on brownfields and 500 on greenfields). The total capital expenses to reach the Concept's goal are estimated at over $6 billion.
At the ame time, AGPU stresses out that instruments of achieving the Government's goals should be produced as soon as possible jointly by the Government and the producers. The Association has numerously argued the importance of creating equal tax stimuli with a purpose of creating economic precondition for a dynamic growth of natural gas production and achieving of the planned indicators in 2020.

The Association systemalically advocates for transparency of reforms negotiations and is open to a constructive dialog to work on joint plans and their further implementation.
Roman Opimakh, executive director of the Association of Gas Producers of Ukraine: "The Concept is the guiding sign to achieving a strategic goal – energy independence of Ukraine. However, without Government's assistance in implementation of the key points of the document, the great plans will remain on paper only. First of all, we are talking about the need to create an environment attractive for investments. The regulatory system should be simplified dramatically, and a stimulating fiscal regime should be implemented to attract teh necessary investments in the gas production industry."

Note: During the vote for the State Budget, the Government and the MPs have unexpectedly turned down the provision of the draft law # 5132, which had to implement the stimulating taax regime from 2017 of 12% flat royalty rate on all new wells.