DEVELOPMENT OF BLACK SEA SEA'S TRANS-KERCH SEGMENT
Ukrainian News Agency, Kyiv, Ukraine, Kyiv, October 19, 2007
KYIV - The Cabinet of Ministers and Vanco International Ltd. (Switzerland)
have signed a product-sharing agreement for the trans-Kerch segment of the
Black Sea shelf. The presidential press service announced this to Ukrainian
News.
Deputy Prime Minister Andrii Kliuev signed the agreement on behalf of
Ukraine while Vanco International's CEO Gene van Dyke signed it on behalf
of the company. The agreement was signed for 30 years.
President Viktor Yuschenko also attended the signing ceremony. Yuschenko
welcomed the signing of the agreement, stressing its comprehensive
importance within the context of strengthening Ukraine's energy security.
According to Yuschenko, it also serves as a good stimulus for significant
acceleration of exploration of the Ukrainian segment of the Black Sea's
continental shelf.
"It is a strategic project for Ukraine, and it sets a unique precedent
primarily for creation of a basis of a national energy strategy and, on the
other hand, cooperation with leading international investors," Yuschenko
said.
According to the presidential press service, Ukraine expects this agreement
to result in investments totaling over USD 15 billion in geological study
and mining of hydrocarbons as well as in mining of over 200 tons of
hydrocarbons.
Implementation of the project is expected to generate over USD 200 billion
in additional budget revenues and create several thousands of new jobs.
The agreement was signed for a segment with an area of 12,960 square meters
located within Ukraine's economic zone 13 kilometers from the coastline of
the Kerch peninsula.
As Ukrainian News earlier reported, Vanco International Ltd. is a subsidiary
of Vanco Energy Company (United States).
The Cabinet of Ministers declared Vanco International Ltd. as the winner of
a competition for the right to develop the trans-Kerch segment of the Black
Sea's continental shelf in April 2006.
Subsequently, the Cabinet of Ministers and Vanco International Ltd. agreed
the terms of the product sharing agreement for the trans-Kerch segment of
the Black Sea shelf.
In November 2006, Vanco International Ltd. said it could accept an agreement
that provided for sharing products from the trans-Kerch segment of the Black
Sea shelf at the ratio of 45:55 (45% to the investor and 55% to the state)
after the start of development of the segment.
The tender proposal suggested that Vanco would receive until the
compensation for investment spending 70% to 80% of the production depending
on other terms of the product-sharing agreement that influence on the result
and 40% to 50% after the compensation for taxes.
In April 2007, the interagency commission for signing and implementation of
product-sharing agreements approved its version of an agreement between the
Cabinet of Ministers and Vanco International Ltd. (Switzerland), a
subsidiary of Vanco Energy Company (United States), on sharing products
mined from the trans-Kerch segment of the Black Sea shelf.
The draft agreement provided for sharing products from the trans-Kerch
segment of the Black Sea shelf in the ratio of 60:40 (60% to the state and
40% to the investor) after the start of development of the segment and 50:50
during the stage before the start of development (before recoupment of
investments).
In May 2007, the Cabinet of Ministers prolonged signing of the agreement on
distribution of produce of Kerch shelf in the Black Sea between the Cabinet
of Ministers and Vanco International until October 21.