Belkova said that in absence of internal capital for large projects, attraction of foreign investors representing large specialized global companies is now of particular importance. One of the existing classic ways to attract such companies is the signature of production sharing agreements. The first agreement of that kind was signed by Indonesia, which is also a developing country, in 1966. Since that time, such agreements have been signed by at least 70 countries. The average validity of such agreements is 20 years and more. Therefore, we have gathered today to discuss and understand how appropriate and promising this mechanism is for Ukraine.
She also drew attention of the hearings participants to the fact that the production sharing agreements are one of numerous ways to attract investments. It is a traditional way for the developing countries willing to attract foreign oil and gas companies. She noted that the peculiarities of such agreements are:
— one party in such agreements is the State (Government or national oil and gas companies);
— hydrocarbons, which are the subject of the agreements, are left in ownership of the host country;
— the state in fact creates special tax incentives to attract an investor and puts major risks in exploration and extraction onto the investors;
— major fiscal sharing of results is conducted through the mechanism of product sharing (gas or oil), instead of taxes, which are typical for our mechanisms (special licenses and agreements on joint activity);
— foreign companies receive compensation of their investments in a form of so-called "cost gas" in compliance with the requirements of an agreement, and the rest of extracted hydrocarbons is shared between the state and the foreign company under the agreement.
Belkova also noted that at least several years may pass from the start of an agreement discussion until the moment of reception of the first cubic meter of gas, thus, today's discussion is the basis for the increase in domestic extraction not earlier than in 2018. "But the sooner we start the faster we succeed," she noted.
The people's deputy also listed "the advantages of the product sharing agreements in the Ukrainian style:"
— the validity of these agreements make up to 50 years as against five years of license validity;
— an opportunity to unite several deposits;
— disputable issues are eyed at an international arbitration court;
— the tender envisions minimum demands to investments (in case of Shell and Chevron it was USD 200 million).
Belkova also informed the people present at the hearings that last summer she initiated the examination of the situation in this sector of Ukraine. A total of 20 interviews were conducted to find problems of companies and state bodies that had gained certain experience in the signature of production sharing agreements or which had planned to engage in such type of activity. She also invited the U.S. Department of State to cooperate in elaboration of a report on risks, which are major for the companies during the discussion of opportunities to sign production sharing agreements.
Belkova thanked "Committee colleagues, experts, who took part in the research, U.S. Embassy and the U.S. Department of State for cooperation in preparation of preliminary recommendations, as well as all employees of the Secretariat of the Verkhovna Rada Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety."