Editors note: this story was updated with additional developments at 13:40 on Sunday Sept. 15.
It almost became one of the largest single foreign investments in Ukraine ever.
Western hedge-fund investors, mostly American, were ready to pump at least $200 million into the country’s substantial reserves of untapped gas under the Black Sea. A further $800 million could be raised if discoveries warranted it.
On July 26, publicly-traded U.S. company Trident emerged the winner in a contentious tender to explore, extract and produce natural gas from part of Ukraine’s offshore shelf close to Romania.
But it was a short-lived victory. On Sept. 11, Ukraine’s new energy minister Oleksiy Orzhel reversed the decision, stating that the Production Sharing Agreements (PSA) for the gas rich offshore concession block were unfulfilled and that a new tender would take place.
“We cancelled the decision,” the minister said of the tender result, which has been criticized by some for having been carried out too quickly and not having been competitive enough.
Trident is located in New York, incorporated in the U.S. state of Delaware and has a subsidiary in Ukraine. The company is led by former Russian lawmaker, now a Ukrainian businessman, Ilya Ponomarev. He moved to Kyiv in 2014 after becoming the only Russian politician to publicly oppose the annexation of Crimea and was granted Ukrainian citizenship in May 2019.
“It is a pity that the new young reformers started their work with such a sad mistake,” Ponomarev said in a Sept. 15 statement. “It would be the largest American investment in Ukraine. We have worked for a long time to raise these funds, and this government decision means serious potential and real losses for us.”
Ponomarev previously told the Kyiv Post that $200 million was ready to be invested immediately and that major energy companies from Romania — GSP Offshore — and Ireland — San Leon Energy — were partnered, contracted and ready to start work. Trident could ultimately invest as much as $1 billion into natural gas extraction and production at the site known as Dolphin, raised from shareholders and investors if their discoveries warranted it, Ponomarev also said, warning that a cancellation of the tender decision could put all that at risk.
The tender initially awarded Trident 50-year rights to explore and extract from a 9,800 square kilometer gas rich offshore zone near the Romanian coastline.
Trident beat three other companies to secure the rights: Texas-registered Frontera Resources, the Caspian Drilling Company (CDC) from Azerbaijan, and Ukrnaftoburinnya, a large Ukrainian gas producer of which the controversial Ukrainian oligarchs Ihor Kolomoisky and Pavel Fuchs are the ultimate beneficiaries.
All of the competing companies sparked controversy for different reasons throughout the tender process.
And Trident’s victory, while supported by many, was quickly opposed from some quarters. It was criticized by then Prime Minister Volodymyr Groysman, as well as the current head of the National Security and Defense Council, Oleksandr Danylyuk.
“The main problem of the competition was the artificially constrained time limits for analyzing the deposits and preparing bids. Serious companies won’t take part in such a competition,” Danylyuk said at the time, complaining that interested companies had only 60 days to submit a proposal.
On Aug. 1, Frontera Resources officially appealed the results of the tender in the Ukrainian courts.
Ponomarev had predicted that the tender result could be cancelled: “They are sending a signal to investors that the rules you make can be changed after the fact,” he said in a July interview with the Kyiv Post. “Secondly, they don’t take into consideration that all of our commitments so far have borne expense. Money was invested for a period of time. All of this costs something.”
“There is not a big line of investors… to come into Ukraine, who are willing to wait indefinitely,” Ponomarev added.
“Now our legal team will evaluate the position to appeal to the court, both Ukrainian and international. We definitely can’t just agree with this decision – it will be a violation of the rights of our shareholders,” Ponomarev stated on Sept. 15.
Read also: US firm wins Ukrainian offshore gas rights, may invest $1 billion
