Ukrnafta loses action in dispute over oil field with company allegedly linked to Poroshenko's ally

Kyiv's Administrative Court of Appeals has dismissed an appeal filed by Ukraine's oil giant Ukrnafta against the first instance court's decision stating that a license for the country's largest oil field in Poltava region was legitimately issued to the little-known company Arkona Gaz-Energia, which is said to be owned by one of Ukrainian President Petro Poroshenko's allies.

The appeal was rejected on February 28.

"The court has ruled to reject Ukrnafta's appeal. The ruling issued by Kyiv's District Administrative Court on December 19, 2017, should be affirmed. The decision is coming into force from the day of its publication and may be appealed within 30 days by lodging an appeal with the Supreme Court of Ukraine," presiding judge Yevhen Chaku read out the verdict.

Read alsoUkrnafta wants to sell gas on Ukraine's domestic marketAs UNIAN reported, Kyiv's District Administrative Court in December 2017 refused to consider a claim filed by Ukrnafta, indicating that the company had missed the deadline for filing the claim. The company's lawyers consider this decision unlawful and claim there is collusion between the State Service of Geology and Mineral Resource, which issued the oil production license, and the licensee, Arkona Gaz-Energia.

Recently, journalists of RFE/RL's Ukrainian bureau have revealed that the founders of Arkona Gaz-Energia are linked with President Poroshenko's allies. In particular, they proved that the owners of Arkona Gaz-Energia were connected with incumbent member of the Higher Council of Justice Oleksiy Malovatsky, who previously worked as a lawyer for the Petro Poroshenko Bloc Party and was associated with Poroshenko's team.

Ukrnafta's lawyers thus claimed there was every reason to speak about an indirect administrative influence on the judges during the consideration of the case at Kyiv's District Administrative Court.

Ukrnafta also asked the General Prosecutor's Office (PGO) to verify the legality of the actions by the State Service of Geology and Mineral Resource, which licensed the little-known company for the development of the country's largest oil field without a tender. What is more, it sold the license for a significantly understated price. The PGO, in turn, instructed its Kyiv office to probe into the complaint.

Ukrnafta also provided documents to the court to demonstrate that the State Service of Geology and Mineral Resource had significantly reduced the previously proven hydrocarbon reserves of the Svystunkivsko-Chernovolutske field to sell the license to Arkona Gaz-Energia for only UAH 3.8 million (US$142,000) instead of UAH 100 million (US$3.73 million).