Ukraine

EITI Status Meaningful progress
Joined EITI in 2013
Latest Data From 2015
Latest Validation 2016
Website EITI Ukraine
Last updated 9 October 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, representating 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.

 

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. 

The EITI report is a social agreement between stakeholders. Our oil and gas industry can become a sector we can all be proud of.
Olga Bielkova, Member of Parliament

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

CommodityReservesUnitSignificance
Oil1.64billion tons
Gas7254.3billion m3
Coal 112.3billion tons1.5% of world's brown coal reserves.
Iron ores20.9billion tons

Oil and gas production

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Mineral Production

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Revenue collection

As of 2018, the extractive sector holds 6% of Ukraine’s GDP, according to the State Statistics Service. The biggest tax payer in 2018 was Naftogaz, which is accountable for 23.3% of the total revenues from the extractive industry. In 2018, the extractive sector contributed around USD 4 billion to the national economy.   

Revenue collection: revenues over time

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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.

Social and economic contribution

  • In 2016, the extractive sector engaged approximately 232 thousand full-time employees, amouting to 11.8% of all employees in the industrial sector. Approximately 66% of all employees in the extractive industries are concentrated in three main regions: Donetsk, Dnipropetrovsk and Luhansk regions.
  • Capital investments in the Ukrainian mining industry amounted to UAH 21.4 billion from January to September 2017.
  • Social and charitable spending by companies amounted to UAH 2.087 million in 2016. More than half of these payments (51.07%) were made by coal mining companies.

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

Validation

Ukraine's Validation against the Standard commenced on 1 July 2017. Ukraine was found to have made meaningful progress in meeting the EITI Standard on 29 June 2018. The country has eight corrective actions to address.

The second Validation will commence on 29 December 2019.

Ukraine's progress by requirement

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