Ukraine

EITI Status Meaningful progress

Joined EITI in 2013

Latest Data From 2015

Latest Validation 2017

Last updated 6 March 2019

Overview

The Government of Ukraine has used the EITI to enhance the country’s standing, raise its credit rating and attract foreign investment. Domestically, EITI reporting has contributed and informed Ukraine’s extractive industries management strategy. Currently, the information from the 2014 to 2016 EITI Reports is published in open data formats on the government website.

Ukraine is rich in various natural resources with petroleum being the main sub-sector. EITI reporting includes oil and gas, hydrocarbon transportation, coal, iron, titanium and manganese ores, clays and quartz sand. Government revenues in 2016 from the extractive industries, reported under the EITI, accounted for 96.78% of the total Budget revenues from all extractive industries. Another important sub-sector is the oil and gas transportation system, operated by the SOE Ukrtransnafta PJSC.

Video of У DiXi Group підготували відео про звіт EITI

Tax and legal framework

The legislative framework that governs the oil and gas production consists of several regulatory instruments. In September 2018 the Parliament adopted Law 2545-VIII ‘On ensuring transparency in extractive industries’ that mandates the disclosure of payments at the project level, the ultimate beneficial owners of companies and “material” 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. Since October 2014 all companies registered in Ukraine are required by law to disclose their beneficial owners in a public register available online. The legislation of Ukraine does not require any 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. However, the application of the last needs to be tested.

Licenses

Extractive companies have to apply for a special subsoil use permit that usually is awarded through auction. The State Service for Geology and Mineral Resources of Ukraine is responsible for issuing permits and regulations. 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, and asset register for government officials. In 2014, the government adopted legislation on beneficial ownership disclosures for all companies. Since then, about 70% of companies reported, including the extractive industries. The data is publicly accessible through unified company register hosted by the Ministry of Justice. 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. To date, approximately 253,000 Ukrainian companies have reported their beneficial ownership to the companies register.

Beneficial Ownership Roadmap - Ukraine

The EITI Chair’s Awards for Beneficial Ownership Transparency

Production

In 2016 production of oil amounted to 1.6 million tons and gas condensate amounted to 0.6 million tons.

Traditionally, the state-owned enterprises are the leaders in oil and natural gas production in 2016 like in previous years. The Naftogaz of Ukraine NJSC group of companies produces about 90% of oil and gas condensate, including Ukrnafta PJSC (about 68% of the total oil production) and Ukrgazvydobuvannia PJSC (22%51 of the total oil production). Ukrgazvydobuvannia PJSC produces 73% of the total volume of natural gas extraction in Ukraine, and Ukrnafta is 6%.

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

Bubble Chart: Government Receipts by Entities (Top 5)

Reconciled revenues by top 5 companies

Revenue allocation

The major share of oil and gas payments is channeled to the state budget. Taxes and other regular fees paid to the state budget may be used to fund any budget items. Therefore, the revenues from oil and gas received by the state are used in the same proportion as other revenues in the country. 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 will be channeled to the regions where extraction occurs, which will greatly contribute to improved dialogue and revenue sharing between local communities, extractive companies and authorities.

Policy recommendations and reforms

On 16 June 2015, Parliament adopted a Law entitled “Introduction of Amendments to Certain Legislative Acts of Ukraine on Ensuring Transparency in the Extractive Industries” that requires extractive companies to report in accordance with the EITI requirements. The Cabinet of Ministers issued Regulation #1039 to define the mechanism for collection and dissemination of information, required by the EITI Standard.

Implementation

The EITI Report 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 providing a platform for an informed public debate. Civil society plays a central role in the EITI by being the main driver for the reforms and by keeping the government accountable for the revenues received.

Governance

EITI implementation has complemented broader economic, financial and institutional reforms, in particular by adopting a Law #521-VIII entitled “Amendments to Certain Legislative Acts of Ukraine on Ensuring the Transparency in the Extractive Industries”, and by amending a Law on “State Registration of Legal Entities and Individual Entrepreneurs” and a Law “Budget Code”. Newly adopted Law 2545-VIII aims to harmonise Ukraine’s legislation with the EITI Standard and the EU Accounting Directive. The law mandates the disclosure of payments at the project level, the ultimate beneficial owners of companies and “material” elements of contracts relating to the extractive industry, such as social obligations, building infrastructure and barter arrangements.

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.