Welcome to the U.S.-Ukraine Business Council

Speaker's Notes from Jim Bown, Vanco Consultant
Ukrainian House Press Room
Kyiv, Ukraine, May 22, 2008


1.  General Comments on the Dispute
It is truly unfortunate and regrettable that Prime Minister Timoshenko has decided unilaterally and arbitrarily to cancel the PSA which Vanco had signed with the Ukrainian government.

Vanco was awarded its license through a fair, open and transparent selection process and all the other bidders involved would attest to this fact. The selection process involved four different Ukrainian cabinets of ministries. Vanco also received the full support of Ukraine’s president.
For this reason, we were incredibly surprised to here about the prime minister’s decision. Vanco unequivocally denies any of the prime minister’s allegations regarding Gazprom. We have not, nor will we, involve Gazprom at any point or in any capacity in this project. All of the investors in this project have already been made known to the public.

While Vanco and its partners continue to believe in Ukraine’s tremendous potential and economic prospects, decision’s such as this one by the prime minister send a dangerous message to the international investment community -- a message which casts doubts over the country’s commitment to upholding agreements, international norms and defending the rights of investors. 

2.  Resolution Through Dialogue
Vanco is committed to working together with the Ukrainian government in order to resolve this dispute in a timely and equitable manner.
If necessary, however, Vanco is prepared to defend its rights to the fullest extent of the law.

3.  Vanco’s Technical Expertise
Vanco has a proven record. It is a leading Western energy firm with extensive experience in undertaking projects just like Prykerchenska.
The exploration and production aspects of this project are very technical and complex and require an experienced company such as Vanco to successfully extract the energy resources Ukraine already possesses.

The prime minister has suggested that our license be assigned to Naftogaz Ukrainiy. However, Naftogaz does not have the technical expertise to implement this project.

4.  Benefits for Ukraine : Energy Independence
The Prykerchenska project will increase Ukraine’s energy independence by providing a domestic source of oil and gas.  Production would also eventually allow Ukraine to export hydrocarbons to other countries.
When taxes and payments for subsoil use are calculated, Ukraine would receive 73% of the income from the Prykerchenska field, with the investors receiving 27%.

Oil and gas extracted from the Prykerchenska Shelf will go to the Ukrainian domestic market first.

5.  Investment Stability & Rule of Law
The government’s decision seriously undermines investor confidence in Ukraine and runs counter to all standards of international law. The fate of foreign investment in Ukraine should not depend on which government is in power or on the whims of some of the country’s political leaders.
Should we be forced to go to international arbitration, we are certain that our position is unassailable and that unilateral violation of the PSA is contrary to the rule of law.