In early January the Cabinet of Ministers of Ukraine decided to substantially decrease the fee for issuance of special permits for subsurface use, granted in order to perform product-sharing agreements (“PSA”).

Accordingly, the price for issuing a special permit to perform PSA will now be 1% of the initial auction price of such special permit.

The above decision was set forth in Resolution No. 24 “On Introduction of Amendments to Section 13 of Procedure of Issuance of Special Permits for Subsurface Use” of 9 January 2013.

It is worth noting that such amendment was adopted in anticipation of signing PSA with Shell regarding Yuzivska subsurface plot.

Accordingly, in view of the above, it remains unclear whether such amendment will be left in force for all future PSAs as a sign of Ukrainian Government’s will to make PSA more economically attractive mechanism for investing in the Ukrainian subsurface, both for Ukrainian and foreign investors.

Or, such change will remain in force only until signing of the already announced PSAs regarding Olesska and Forosska subsurface plots as a gesture of good will for the first “foreign pioneers”, dealing with the Ukrainian unconventional hydrocarbon deposits. If this decrease is temporary, all future investors may need to pay the full price of the special permit issued for performance of the PSA.

Additional notes
This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.