At the beginning of April of 2018, the Kyiv Administrative Court of Appeals sustained the ruling of the Kyiv District Administrative Court that earlier ruled in favor of PJSC Ukrnafta in the case concerning renewal of its production licenses. The court ruled that the State Geological Service unlawfully refused to consider the applications of Ukrnafta to extend 11 of its licenses expiring in the first half of 2018. The licenses in question include those for production at Rosilnyanske, Turutynske, Mykolayvske, Lukvynske, Dovbushansko-Bystrytske, Oriv-Ulychnyanske, Dolynske, Strutynske, Spaske, Pasichnyanske and Andriyashyvske fields. The ruling of the court of appeals entered into force on 3 April 2018.

The administrative court of the first instance ruled to support Ukrnafta’s claim on 21 December 2017 obligating the State Geological Service to renew the company’s licenses and issue an order, taking into account the principle of tacit approval. The principle is set forth in part 6 of article 4-1 of the Law of Ukraine on Permitting System for Business Activities. The court indicated that the regulator absolved itself from its taking any action to consider Ukrnafta’s applications to renew the licenses. This resulted in delays with the extension of the licenses even though the company had filed the applications on time.

In case the regulator continues evading the implementation of the court decision, Ukrnafta may have to refer the case to the State Enforcement Service.

In mid-February 2018 Ukrnafta filed a separate lawsuit against the State Geological Service to extend 16 more licenses expiring this year.

Extension of the 27 licenses expiring this year is critical for Ukrnafta, as it will have impact on its operational and financial results, investments, employment, as well as on the tax revenues for the central and local budgets and the company’s ability to repay the overdue tax debt. The company estimates that the 27 licenses account for 53% of its annual production of oil and condensate, as well as 30% of the annual production of gas. In 2018 alone, these licenses will generate circa UAH 3 bln in rent payments in rent tax.