Ukraine

EITI Status Meaningful progress

Joined EITI in 2013

Latest Data From 2016

Latest Validation 2017

Last updated 4 December 2019

Overview

The extractive sector plays an important role in Ukraine’s economy, amounting to around 6% of GDP. The industry contributes UAH 120 billion to the state budget, representing 41% of government revenues from 100 biggest tax payers in Ukraine in 2018. The major extractives companies operating in the Ukraine are UkrGasVydobuvannya PJSC (gas), Ukrnafta PJSC (oil) and DTEK PJSC (coal). They paid UAH 41.26 billion, UAH 15.54 billion and UAH 8.44 billion respectively. Despite the developed extractive sector, Ukraine remains dependent on imports from extractive commodities.

Ukraine joined the EITI in 2013 with the aim to strengthen governance and reduce corruption in its extractive sector. The country has since published three EITI Reports between 2013 and 2016 that provide detailed analysis of the extractive sector, including oil and gas, hydrocarbon transportation, coal, iron, titanium and manganese ores, clays and quartz sand. In order to enhance the implementation of the EITI Standard, the country has also adopted legislation that provides incentives for companies to disclose information.

Video of У DiXi Group підготували відео про звіт EITI

Tax and legal framework

The Subsoil Code was adopted in 1994 and is the main document that governs the extractive sector in Ukraine. It determines the legal status of subsoil minerals as well as regulation of license granting by the national and local authorities. Among the important laws regulating the extractive sector are the Mining Law of Ukraine, the Law of Ukraine “On Oil and Gas”, the Law “On the Natural Gas Market”.

In September 2018, Ukraine’s national parliament passed the widely-backed Law 2545-VIII “On ensuring transparency in extractive industries”, which harmonises Ukraine’s legislation with the EITI Standard. It mandates the disclosure of payments made to the government at the project level, the ultimate beneficial owners of extractive companies, and other elements of contracts relating to the extractive industry, such as social obligations, building infrastructure and barter arrangements.

Ukraine has a license registry which is accessible online. The legislation of Ukraine does not require full disclosure of agreements related to subsurface resource use.

Contracts

Law 2545-VIII “On ensuring transparency in extractive industries” mandates the disclosure of “material” elements of contracts relating to the extractive industry, such as social obligations, building infrastructure and barter arrangements.

Licenses

The State Service for Geology and Mineral Resources of Ukraine is responsible for issuing permits and regulations. Extractive companies have to apply for a special subsoil use permits, which are awarded through auction. All information on bidding is available online. Product sharing agreements define conditions for hydrocarbon exploration and extraction and are obtained through direct negotiations.

Additionally, an interactive map includes the visual delineation of the license coordinates and serves as an alternative route to access license-information.

Beneficial ownership disclosure

Ukraine established the world’s first beneficial ownership register of legal entities under the Ministry of Justice, and asset register for government officials. In 2014, the government adopted legislation on beneficial ownership disclosures for all companies.

Since May 2017, the government has been working with OpenOwnership to produce high quality data to integrate its national central register of beneficial ownership with the OpenOwnership Register.

Beneficial Ownership Roadmap - Ukraine

The EITI Chair’s Awards for Beneficial Ownership Transparency

Production

In 2017, Ukraine produced 34.9 million tons of coal, 20.5 bcm of gas and 2.2 million tons of oil. Oil and natural gas production are mainly led by state-owned enterprises. In 2017, Ukrgazvydobuvannia PJSC produced 15.3 bcm of natural gas, representing 74.3% of total national production. The remaining amount is produced by Chornomornaftogas PJSC, Ukrnafta PJSC and others.

Most of the reserves and extraction volumes are concentrated in the eastern region (Poltava and Kharkiv Oblasts), where 239 fields account for 80.96% of the reserves and 94.49% of the total production. The share of the western region (Lviv, Ivano-Frankivsk Oblasts) in the total production volumes amounts to 5.77%. The largest company in oil sector is Ukrnafta PJSC, and DTEK is the largest in the mining sector.

Natural resources


Commodity	Reserves	Unit	Significance
Oil	1.64	billion tons
Gas	7254.3	billion m3
Coal	112.3	billion tons	1.5% of world's brown coal reserves.
Iron ores	20.9	billion tons

Main revenue recipients by government entity

Reconciled revenues by top 5 companies

Revenue allocation

The majority of oil and gas payments made to the government is channelled to the state budget, and is received in the form of taxes and other regular fees. The Budget Code of Ukraine No. 2456-VI 2010 determines the procedures for allocation of tax revenues between state and local budgets.

From 1 January 2018, 5% of the rental payments from oil and gas companies are channeled to the regions where extraction occurs through subnational payments, contributing to improved dialogue and revenue sharing between local communities, extractive companies and authorities.

Policy recommendations and reforms

Ukraine’s national parliament passed the widely-backed Law 2545-VIII ‘On ensuring transparency in extractive industries’ on 18 September 2018. The legislation sets out legal principles for the collection, disclosure and dissemination of data on Ukraine’s extractive industries.

Since 1 January 2018, Ukraine enforced the Law on Amendments to the Budget Code of Ukraine Regarding the Inclusion of Rent Payment for the Use of Subsoil for the Extraction of Oil, Natural Gas and Gas Condensate No. 1793-VIII. The law stipulates that 2% of the rent paid by companies be directed to regional budgets, 2% to district budgets and 1% to local government budgets at the place of location (production) of the relevant natural resources. As an exception, budgets of cities of republican and regional significance and budgets of the amalgamated communities receive 3% of the rent. The remaining 95% of rent payments are directed to the general fund of the state budget.

Implementation

EITI reporting covers oil, gas and mining industries; in particular, coal, iron, manganese, titanium, clay, and sand. Metal ores account for 97% of Ukraine’s extractive sector exports – almost 6% of total exports of Ukraine.

The strength of Ukraine’s EITI implementation has been its success in using the process to address local concerns, both through active dissemination and outreach efforts and by informing public debate. As active participants in the EITI process and main drivers for reform, civil society organisations such as xx and xx play a central in keeping the government accountable for the revenues received.

Governance

The Ministry of Energy and Coal is responsible for implementing the EITI. The national secretariat, hosted by the Ministry, supports the functioning of the multi-stakeholder group (MSG) and delivery of the work plan.

EITI implementation has complemented broader economic, financial and institutional reforms. The recently adopted Law 2545-VIII aims to harmonise Ukraine’s legislation with the EITI Standard and the EU Accounting Directive.

Timeline

Ukraine's progress by requirement

EITI Reports and other key documents

Law of Ukraine #2545-VIII "On ensuring transparency in extractive industries" (translation)

Published Date:

August, 2018

Ukraine’s national parliament passed the widely-backed Law 2545-VIII ‘On ensuring transparency in extractive industries’ on 18 September 2018. The new legislation sets out legal principles for the collection, disclosure and dissemination of data on Ukraine’s extractive industries. It is hailed by campaigners as a milestone on the road to transparency and accountability in the country’s oil, gas and mining sector.