JKX calls for embassy aid in Ukraine

27 July 2016, Week 29 Issue 891

London-listed JKX Oil & Gas is seeking assistance from the UK and US embassies in Kyiv amid an ongoing criminal investigation of its Ukrainian subsidiary by local prosecutors.

The producer previously reported that Ukrainian law enforcers had carried out a snap raid in mid-June at the offices of Poltava Petroleum Co. (PPC), as well as the homes of two of the company’s executives.

JKX said last week it was continuing to receive information requests from authorities over the alleged misappropriation of funds. It noted that PPC was co-operating with investigators, but added that the probe “appears to have broadened from the original search warrant.”

It is unclear whether the nature of the investigation has changed since earlier this month, when JKX informed its shareholders that the case was tied to claims by a local prosecutor of alleged unpaid taxes. The company said at the time it considered the proceedings “completely unjustified.”

“JKX has now referred the matter to the UK and US Embassies in Kyiv and has asked for their assistance in engaging with the relevant authorities to resolve the situation,” the producer said last week.

JKX, which owns assets in Russia, Ukraine, Hungary, Bulgaria and Slovakia, has endured a rocky relationship with Kyiv authorities for years. In February of last year, the firm launched arbitration proceedings against the Ukrainian government at The Hague, accusing it of breaching the Energy Charter Treaty and the bilateral investment protection agreement between Ukraine and the UK. Specifically, the company is demanding that Kyiv return US$270 million in overpaid production taxes.

A final hearing on the case was due to start on July 4. As of press time, however, there has been no update on the proceedings. In February, sources close to JKX’s management told the Financial Times that the company was willing to settle for a smaller amount of compensation, given that continuing with the case would cost US$2 million per year. One source even said the producer would consider accepting repayment in tax credits or funding towards future acquisitions.  PPC, a wholly owned unit of JKX, operates the Ignatovskaya, Molchanov, Novo-Nikolayev and Rudenkovskoye licences in the central Ukrainian region of Poltava. Ukrainian authorities revoked these licences effective from February. In June, however, JKX said it had succeeded in lifting the suspensions, which it said the Kharkiv Administration Court of Appeal had ruled were illegal. JKX produced around 10,300 barrels of oil equivalent per day in the first five months of the year, up 21.3% on yields during the same period of 2015.

Joseph Murphy

Edited by

Joseph Murphy


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