Ukraine: a rich seam for gas firms despite crisis
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Friday 28 March 2014
The veteran Ukraine energy explorer, Paul Davies, said his JKX Oil & Gas business would continue its investment push into the country this year despite the Russian crisis.
He said JKX’s Ukranian operations had been unaffected so far, and was optimistic about revenues from a new fracking project there.
Mr Davies said: “We have operations in Ukraine and Russia, so we are trying to keep as much up to speed on what is going down, but for our operations, life goes on as normal,” he said. “They’ve announced presidential elections on 25 May. Any delay on that is not generally going to be a good thing. It would appear to me to be sensible to get the election done and take it from there.”
However, the impact of the Russian incursion on local currencies is having an impact on the company’s business, which sells its gas on both sides of the border.
One of the biggest shareholders at JKX is the Ukrainian oligarch Igor Kolomoisky , who was recently made governor of a province in the country by the temporary government.
Within days of that appointment, Russia’s central bank put the Russian subsidiary of Kolomoisky’s Privatbank into temporary administration. President Vladimir Putin declared Mr Kolomoisky “a unique imposter”, and accused him of violating a contract with Chelsea FC owner Roman Abramovich.
JKX is currently in a legal dispute with Mr Kolomoisky, who, with the London-based Ukrainian oligarch Gennadiy Bogolyubov, last year attempted what JKX claimed was a raid on the company. That resulted in a legal action that is still rumbling through the courts with an appeal scheduled for next week.
Another Ukranian oligarch formerly associated with JKX is Dmitry Firtash, who was arrested and bailed for €125m in Vienna earlier this month on the orders of the FBI under suspicion of corruption. However, Mr Davies stressed Mr Firtash’s business had sold its stake in JKX back in 2006. Mr Firtash is said to have been introduced to JKX by Viscount Raymond Asquith, reported to have been a former Moscow MI6 bureau chief. Asquith remains a non-executive director of JKX.
Profit from operations after exceptional items jumped to $9.2m for the year ended 31 December from $5.8m a year earlier.
Revenue fell about 11 percent to $180.7m. The Ukrainian currency fell 25 per cent against the dollar during the unrest, hitting dollar revenues in the last quarter. However, JKX said it did not anticipate any reduction in the contractual prices it has for its gas with the Ukrainian or Russian authorities.
The current investment programme at JKX is backed by the company’s raising of a $40m bond last year.
Ukrainian energy debts are one cause of its strife with Russia
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