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Take it or leave it. Yatsenyuk against cheap oil for Kolomoisky

Contrary to the decision of the Cabinet Ukrnafta continues to sell oil on UICE at prices lower than international. Yatsenyuk has requested the General Prosecutor’s Office to decide who is right.

According to the materials of Liga Business Inform Information Agency www.liga.net

The Privat group clearly not in a good relationship with the government of Arseniy Yatsenyuk. Recently it was reported that the General Prosecutor's Office upon request of the Cabinet began the investigation of pumping technological oil from the oil transportation system by Privat companies. There was another scandal at the end of last week around the Igor Kolomoisky’s energy business Privat group.

Controlled by Privats Ukrnafta refused to sell its oil on an authorized exchange. Instead, on July 29, Ukrnafta sold oil to the value of 3 billion UAH on the UICE exchange. According to the government, Ukrnafta sold oil at a lower price because of which received on half billion UAH less, and the State Budget lost part of taxes.

Prime Minister Arsenii Yatsenyuk gave a task to the Minister of Energy and Coal Industry to sort out the situation and to enquire with General Prosecutor’s Office.

Liga Business Inform understood why Ukrnafta categorically doesn’t want to change the exchange and what it can do to the company.

War of the Exchanges

 According to the law oil-producing companies which are state owned more than 50%, must sell oil on exchange auctions, the procedure of which adopted by the Cabinet of Ministers.

Since the middle of last year the only platform on which oil and liquefied gas were sold became the First Independent Exchange (FIEX) owned by the company's structures Serhii Kurchenko’s VETEK. Many years before trading of energy resources were held at the Ukrainian Interbank Currency Exchange (UICE) and the Ukrainian Agrarian Exchange.

After Kurchenko’s escape from Ukraine, the Ministry of Energy terminated the contract with FIEX and energy auctions were "legally" frozen. To resume them one had to choose new exchange for the oil trading. In June this year, the Ministry of Energy and Coal Industry held a contest in which Ukrainian Universal Exchange (UUEX) was chosen as the venue of sale auction on state oil, gas condensate and liquefied gas.

Not all were comfortable with the choice of the Ministry in favor of the UUEX. The Ukrainian Interbank Currency Exchange (UICE) challenged the results in court. On July 22, the District administrative court of Kyiv to secure the claim has suspended the decision of the Ministry on the choice of the UUEX as the winner of the competition. "We believe that the procedure of the exchange choice was conducted in violation of the law”, said one of the UICE leaders who wished to remain not named to Liga Business Inform. - We will sue until the corruption of the competition will not be removed”. However, what is corruption the UICE representative didn’t say.

Ukrnafta producer of 80% of oil in Ukraine availed the court decision. The company refused to sell its oil on the Ukrainian Universal Exchange. Instead Ukrnafta on July 29, held an auction on the UICE where sold 290,000 tons of oil and 11 400 tons of condensate. All raw materials are "gone" at a starting price, which amounts to about 3 billion UAH.

Video from the auction, announced by specialized edition Oilnews.com.ua shows that auctioneer explains the bidding on UICE on the decision of the district court and the deteriorating financial condition of Ukrnafta. According to him, the company had no opportunity to sell their raw materials for two months and now forced to conduct this auction to prevent the stopping of oil production.

 The UUEX doesn’t agree with such arguments and insist that, despite the court's decision auctions should take place on this exchange.

"The court suspended the decision of the Ministry of Energy, but the UUEX and the Ministry signed the Contract on the auctions, the legality of which was not disputed by anyone," explains the Director of the UUEX Olexii Vlasenko. - Therefore, the arguments of Ukrnafta unfounded, especially as the Auction Committee (consists of representatives of the Ministry of Energy, Naftogaz, the MEDT. - Ed.) did not give the permission to conduct trades on UICE".

The Prime Minister Arsenii Yatsenyuk adheres the position of the UUEX. He instructed the Minister of Energy and Coal Industry Iurii Prodan and the Minister of Internal Affairs Arsen Avakov to understand the situation of the auction. "Organizing and conducting auctions by UICE on oil and gas condensate sale without a decision by the Ministry of Energy and the Auction Committee are illegal," as said in the letter of the Prime Minister signed by Yatsenyuk, a photocopy of which is available to Liga Business Inform.

Kolomoisky’s cheap oil

 Why did the exchanges quarrel invite the attention of the Prime Minister?

Ukrnafta, in which 50%+1 share owned by Naftogaz, and 42% - the Privat group, controlled by last for many years selling its raw materials on the auction of UICE. And Ukrnafta has always sold oil for a starting price, without any bidding. Real buyer was only one company that is also controlled by Privat group: Kremenchug OPP,   Galychyna, Naftokhimik Prykarpattya and others. Kremenchug OPP was loaded by Privat with Ukrnafta’s oil.

"As such, trading oil on UICE didn't actually happen. Ukrnafta sells all raw materials at a starting price of their companies, “says Director of the consulting group A-95 Serhii Kuyun. And in recent years, this price is significantly below the international price on oil. Only on the last auction on July 29, Ukrnafta lost about 540 million UAH". Ukrainian oil was sold at auction for $88 per barrel, whereas the world price of oil of this quality was in the range of $100-108.

It’s advantageous for Ukrnafta to lower the price of oil, since half the company's profits in the form of dividends should go to the budget. While profits received by Kremenchug OPP or Privat filling stations remains in the group.

Source: Liga Business Inform

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