Eastern Europe-focused junior producer JKX Oil & Gas said Wednesday that it will suspend its planned 2015 capital investment program in Ukraine "until the economic parameters for investment improve".
JKX said it had to make the move due to the combination of Ukrainian government-imposed restrictions on selling its gas to industrial clients and a "punitive" rate of gas production tax.
On November 29 the Ukrainian government issued a decree directing major industrial buyers to acquire their gas solely from the Ukraine state-owned gas company Naftogaz.
As a result of the suspension of its investment program, JKX said it will stack the Skytop drilling rig following its use in completing well IG-140 – which is situated on the Ignatovskoye field in the east of Ukraine.
JKX also reported that it sold approximately 80 percent of its December gas production capacity to industrial customers, with only 20 percent of its gas production capacity shut-in during the month. However, the firm added that the market available to private gas producers in Ukraine continues to contract, with "competition for the increasingly-limited number of creditworthy industrial customers becoming intense".
JKX expects that gas sales may reduce to less than 50 percent of its production capacity in Ukraine while the government's decree remains in force.
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