News List


News List:

Viktor Gladun: oil and gas prices move us to development

Poltava Petroleum Company (PPC), the oldest private producer with foreign capital, has undergone changes again. The changes took place in the headquarters of the British JKX Oil & Gas, where new members joined the Board of Directors. Viktor Gladun, acting CEO of JKX and Director of Poltava Petroleum Company, has shared some details with NefteRynok.

Oleksandr Sirenko


Viktor, this week there has been an announcement about changes in the JKX Board of Directors. Right away, I will ask you about the issue the market is wondering about: for the first time, a person from the Privat Group has become a non-executive director, what implications will this have for the work of the Board of Directors and for the Ukrainian PPC in particular?

Over its 23-years’ history, JKX Oil & Gas has been managed in a transparent way and complied with all requirements of the London Stock Exchange. The Board of Directors has always been independent and has never been influenced by some specific shareholder. It has always been this way and will hopefully always be like that.

Indeed, Michael Bakunenko representing the Есlairs Group (which holds 27% of JKX’s shares – NR) with a portion of the Group’s shares held by Ihor Kolomoiskyi or, as commonly referred to, the Privat Group, has become a member of the Board. At the same time, Proxima, another large shareholder with 19% of the Company’s shares, is represented on the Board by Vladimir Tatarchuk and Vladimir Rusinov.

The presence of shareholders’ representatives on the Company’s Board of Directors is standard practice. The interests of all shareholders and particularly of minority ones are looked after by independent directors as well. At present, we have three of them. Apart from Hans Jochum Horn, we have been joined by Adrian Coates (previously a Non-Executive Director of Regal Petroleum) and Andrey Shtyrba. We are planning to invite another independent director in the near future. Thus, none of the Company’s shareholders will have any excessive influence on decision making. We saw it on December 8 with the appointments made effective. The new Chairman Hans Jochum Horn set a task – the Board should be balanced.

Hans Jochum Horn visited Ukraine before the meeting. What were his impressions?

Hans has gained versatile managerial experience due to his work for companies in various lines of business in Europe, the CIS countries, Africa etc. His knowledge of oil business is based on his 15-years’ experience of working with Norwegian oilfield service companies. He held top management positions in the Rendeavour Group, Africa’s largest urban developer, Renaissance Group, Uralkali and Eurochem. Hans Jochum Horn was also a Managing Partner in Arthur Andersen (now Ernst and Young) for the CIS, which is why he has a good grasp of the Ukrainian realities. One can see how well he feels our market, and thus the tasks are clear – to stabilize PPC’s work and make use of combined local and foreign experience to enhance production.

What is your plan of development?

Following the changes concerning the Board and management as a result of the shareholders’ meeting in June, we conducted a technical audit of the fracturing programme for four wells in the Rudenkivske field. The Company’s failure related to technology and human factors and the costs incurred as a result made us change our approach to decision making. Having analyzed the data available, we have drawn up a new development plan for our fields with the drilling to start as early as January 2018. The well workover programme suspended because of the fracturing operations this summer has been resumed. We are considering different scenarios of new projects. Also, we are working on a new strategy of sales. Primarily, this implies a complete transfer to selling natural gas though exchanges. Given the huge demand for LPG in Ukraine and the underloaded infrastructure, we are planning to increase production through third-party supplies of raw materials (NGL) for processing.

What company will be drilling wells for you and on what sites?

We have selected Specmechservis as a drilling contractor. It is one of the strongest players in Ukraine and probably has more job requests than any other Ukrainian drilling company. The first wells are to be drilled on the Ignativske field at the new stage of the Company’s development.

But this does not mean we are doing nothing in our other fields. We see a strong remaining potential in all of our main producing fields – Rudenkivske, Ignativske, Movchanivske, Novomykolaivske and Elizavetivske. Here the plan is to enhance the performance of the existing stock of wells and drill new wells. Also, there are some interesting exploration targets within in the Elizavetivske and Zaplavske licences. In addition, the issues related to the old wells owned by state-run companies and located within the Company’s licences are being resolved step by step.

We hope to spend about $7-11m on servicing operations in 2018. Maybe more, if we manage to attract additional capital.

New licences, purchase of companies with licences – which of these items are covered by your monitoring?

All of them! There are proposals – not many, but a few. We are ready to invest in new fields. We are considering the possibility of purchasing new licences and conducting exploration. Still, we expect the government to ensure transparent and foreseeable conditions for future investing, and a stable fiscal policy.

PPC was the first private company to launch LPG production. The decline in production has affected the volumes of LPG produced. What will the Company do to go back to the previous plant load?

Currently, our LPG plant is not loaded to its full capacity. In 2010, we produced 400 mmcm of gas and the plant was built to accommodate those volumes. At present, PPC accounts for 2.5% of Ukraine’s LPG market. In 2017, PPC sold gas to 64 clients (+ 45%). Obviously, from the strategic perspective of the Company’s development, there is a need to increase the load. We are enhancing the Commercial Department and one of the objectives I set is to increase the production efficiency.

Will there be any changes as regards trading in oil, gas condensate and natural gas?

Regarding liquid hydrocarbons, we are staying at our electronic platform. Due to its electronic trading, PPC has become a benchmark for the natural gas market. Many companies use our prices as a starting point to set their prices at trades. The most efficient sales of natural gas are those held at UEEX. Not long ago we decided to sell all of our gas through exchanges and even were the first to sell gas based on forward contracts. Also, we plan to consider increasing volumes through imported deliveries. We have been looking closely at new exchanges – to date, it has been the most efficient and transparent mechanism. I would like to point out that we already imported gas last year and the trend will keep developing in 2018.

Nefterynok’s Information:

JKX Oil&Gas’s shareholders are Eclairs Group Limited (27.47%), Proxima Capital Group (19.92%), Neptune Invest & Finance Corp. (12.51%), Glengary Overseas Ltd (11.42%) and Interneft Ltd (6.6%). The main asset is the Ukrainian PPC with the production amounting to 159 mmcm of gas, 29 thou tonnes of oil and gas condensate and 9 thou tonnes of LPG for 11 months of 2017. Also, JKX has assets in Adygea (Russia), Hungary and Slovakia.