Govt asks NBU to allow Ukrgazvydobuvannia to carry out cross-border transfer of $26.7 mln to pay for Chinese equipment

KYIV. March 6 (Interfax-Ukraine) – The Cabinet of Ministers has submitted a petition to the National Bank of Ukraine (NBU) to grant permission to JSC Ukrgazvydobuvannia to conduct a cross-border transfer of $26.740 million to pay for the equipment of Sichuan Honghua Petroleum Equipment Co. (China).

“The Cabinet of Ministers of Ukraine applies to the National Bank for permission to carry out cross-border transfers of currency values from Ukraine to JSC Ukrgazvydobuvannia in the transaction of paying for energy equipment supplied in 2019,” the text of the petition, which was approved by government resolution No. 187-r dated March 3, 2023.

As follows from the document, payment for the power equipment supplied in 2019 under the foreign economic contract dated June 22, 2018 is necessary for the urgent modernization and maintenance of 15 drilling rigs that will be used to restore the natural gas production process in the recently liberated territories of Ukraine.

The transaction will be carried out through PJSC Ukrgasbank.

“These modernized drilling rigs are now being used in full, which is an important factor in the successful achievement of the strategic goals of JSC Ukrgazvydobuvannia to increase production to increase the energy independence of Ukraine,” the government said.

At the same time, as the government explained, two new machines manufactured by Sichuan Honghua Petroleum Equipment Co. received significant damage in hostilities that cannot be repaired by outside organizations or Ukrgazvydobuvannia’s own resources since such restoration is possible only by the manufacturing company as the owner of patented technologies.

“Failure to pay said debt to Sichuan Honghua Petroleum Equipment Co. creates real risks regarding the impossibility of restoring said drilling rigs,” the government said.

In addition, the entire fleet of new and modernized drilling rigs requires appropriate after-sales service, including exclusive spare parts for equipment, technical supervision, and warranty service.

“For this purpose, a number of contracts were signed with Honghua International Ukraine LLC, the sole and exclusive authorized representative in Ukraine of Sichuan Honghua Petroleum Equipment Co., for the implementation of the specified maintenance and supply of necessary spare parts,” the government said.

However, the existing and growing debt under the contract dated June 22, 2018 leads to difficulties with the conclusion of new production-necessary contracts.

At the same time, Ukrgazvydobuvannia plans to return to operation of all rigs as soon as possible since drilling new wells gives the most significant and sustainable effect for providing the country with its own gas, the Cabinet of Ministers said.

“Ignoring the complex of these risks may lead to a shutdown of 3/4 of the drilling fleet already in the second half of 2023, since due to the lack of original spare parts and service support from the manufacturer’s company, drilling rigs manufactured by Sichuan Honghua Petroleum Equipment Co. may eventually lose their suitability for use,” the government said.

On June 22, 2018, JSC Ukrgazvydobuvannia entered into an agreement for a total of $53.3 million with Sichuan Honghua Petroleum Equipment Co., one of the largest Chinese suppliers, for the delivery of power equipment for the modernization of 15 drilling rigs delivered in June-August 2019.

The terms of the contract determined the deferment of the final payment, namely 720 calendar days after the modernization of each individual drilling rig.

According to the payment schedule, JSC Ukrgazvydobuvannia shall make settlements of $26.74 million under the specified contract.