REUTERS
The forthcoming withdrawal of the Dutch group symbolizes another round of crisis in the domestic gas industry, caused by the collapse in gas prices.
Ukrainian oligarch Victor Pinchuk and billionaire Ian Taylor are preparing to sell the Geo Alliance group of gas production companies.
"Geo Alliance Group, which operates 16 fields, was formed in two short stages," the Ukrainian online newspaper Ukrayinska Pravda said on February 3, referring to its source.
"The first one lasted from September to November 2004, during which ten hydrocarbon deposits were registered to low proflie PJSC Natural Resources, LLC Oberon-Coal, and LLC Intek Geo.
The second stage took place in July 2007, when a previously unknown enterprise, LLC East Geological Union, became the owner of six oil and gas sites, some of which had previously been explored at the expense of the state-owned Nadra Ukrayny, the publication said.
In 2012, a partner appeared in Pinchuk's gas business when the Netherlands-based Vitol Group, the world's major oil trader with US$150 billion in minimum annual revenue, acquired a 25% stake in Geo Alliance. In 2017, Vitol increased its stake to 50%.
"For both sides, Geo Alliance played the role of an 'entry ticket' to the Ukrainian gas market," Ukrayinska Pravda wrote.
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In particular, during Petro Poroshenko's presidency, Vitol structures independently, without Pinchuk's companies, took part in a government tender to develop the Yuzivska hydrocarbon section with a huge area of 7,900 kilometers, but failed to win the bid.
"At the same time, structures of the EastOne investment advisory group of companies were interested in buying LLC Cub-Gas, but lost it to Mykola Zlochevskiy' Burisma Holdings. The diverse interests of EastOne and Vitol resulted in a real 'divorce'," reads the article.
"Geo Alliance has been put up for sale," a market source said.
Journalists requested comments from Geo Alliance and Nataliya Vovk, who heads Pinchuk's press service, but received no response.
One of Pinchuk's business partners, who wished to remain anonymous, denied information about the sale of Geo Alliance. He says he "received this information firsthand," that is, from Pinchuk.
The source insists on this, offering three arguments.
First, the sale of Geo Alliance is considered by Pinchuk simultaneously with the sale of the second "non-key" business, namely Bank Credit Dnipro.
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Second, Geo Alliance is being sold in agreement with Vitol. Thus, this refers to the sale of 100% of gas business.
Third, Pinchuk's structures estimate Geo Alliance at US$300 million, while Vitol and the entire domestic market consider the price frankly overstated.
According to the source, the founder of EastOne set about "pumping up" his gas business with new assets to justify the declared price.
"Vitol is the world's largest hydrocarbon trader, so its withdrawal from the Ukrainian market sends a negative signal to potential investors," the publication said.
It is not just about image losses. The forthcoming withdrawal of the Dutch group symbolizes another round of crisis in the domestic gas industry, caused by the collapse in gas prices.
"If it's bad for gas producers, one can't escape the troubles of their main counterparty [of the sector], Pinchuk's Interpipe [integrated pipe and wheel company]. As far back as 2019, its pipe plants started being affected by phasing out of a program of Ukraine's major hydrocarbon producer Ukrgasvydobuvannya," the article says.