RegalPetroleum– Ukrainian licences suspended, according to official report

The future of Regals’ operations in Ukraine remain unclear after the Ministry of Environment of Ukraine issued an order on 30th March 2010, suspending Regal’s oil & gas licences due to a breach of subsoil use.



According to the order of the Ministry of Environment of Ukraine (dated 30 March 2010), the special permits (licences) # 3334 and 3335 issued on 1 July 2004 for the oil & gas fields Mekhediviska-Golotvshinska and Svyrydivske have been suspended due to the breach of subsoil use in accordance with the agreement and the breach of the legislation concerning the protection of the environment and efficient use of mineral resources.

At the moment the question of revoking Regal licences has not been discussed at the Ministry and it is expected that Regal will be able to rectify the violations and comply with the licence terms going forward to successfully develop the fields
Ms Yuliya Valeeva, a spokesperson for the Ministry of Environment, said: “At the end of 2009, a number of serious violations of the license agreement for the oil & gas fields Mekhediviska-Golotvshinska and Svyrydivske took place. These violations were with regards to environmental and tax legislation of Ukraine. The joint committee consisting of 22 representatives of different Ministry departments on 23 December 2009 came to the conclusion that Regal’s licences should be suspended and on the 30 March 2010, the Minister of Environment of Ukraine Mr. Victor Boyko signed an order based on the committee’s decision.The Company was given an opportunity to rectify the violations in accordance with the legislation.”
According to the Ministry, there is no political angle to this issue as the decision was made based on the committee’s decision consisting of representatives from different departments and also the initial decision was taken under the previous government.
It is understood that Minister Victor Boyko appealed four times to the management of Regal to sort out the issue, but received no response from the Company A number of members of the parliament tried to lobby Regal’s interests to annul the suspension of the licences.


After many requests by the Ministry of Environment and Geological office of Ukraine, Regal Petroleum started work on resolving the issues and some of the violations have been rectified by the Company.


It is also understood that once Regal provides the evidence to the committee that all of the violations have been rectified in accordance with the licence terms on Mekhediviska-Golotvshinska and Svyrydivske oil and gas fields, the Ministry will consider restoring Regal’s right to the licenses in full.
The Company was reportedly notified about the suspension of its licences and according to the legislation of Ukraine was supposed to immediately suspend production at the fields. Regal ignored these regulations and as a result broke the Ukrainian law.
The Mekhediviska-Golotvschinska (MEX-GOL) and Svyrydivske (SV) gas and condensate fields are Regal’s primary assets. Recent independent assessment of its reserves in Ukraine commissioned earlier this year allocated 102.4 mmboe to an additional 'remaining possible' category and a further 151.9 mmboe to 'unrisked (P50) prospective resources' to the remaining proved & probable reserves volume of 151.3 mmboe. Regal’s daily field production rate on 2 May 2010 was 1,786 boepd.
It is unclear whether Regal is likely to be investigated by the London Stock Exchange (LSE) for not complying with AIM rules, which stipulates that the Company has to release – via a Regulatory News Service statement or RNS - any information of a price sensitive nature to the market within 24 hours.
However, despite not releasing this information, the share price entered a period of rapid decline, losing over 50% of its share value since mid-March.
In November 2009, City regulators fined Regal Petroleum a record £600,000 after a damning report covering two years when the oil explorer was controlled by Frank Timis, the controversial businessman.
The report stated that AIM-listed Regal had issued a string of misleading stock market announcements that drove up the share price more than 500 per cent but ultimately led to investors losing hundreds of millions of pounds.
According to the report: “The number, nature and duration of the breaches demonstrate a systematic pattern of conduct evidencing a reckless disregard for the AIM rules by Regal.”
Regal was asked to comment, but has yet to do so. Ukrainian Energy is hoping to be able to present Regal’s view of the situation and will publish the official Company’s comment if one is to follow.