Ukraine’s Government Says: Vanco Go Home! But is the Rothschild family changing partners?

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Ukraine’s Government Says:  Vanco Go Home! But is the Rothschild family changing partners?

Alexander Serafimovich

The ongoing feud among all sectors of Ukrainian power is ratcheting up in noise volume. And where could a single investor go? The unreliable and unstable Ukraine, with serious ambitions for European integration, is hobbled by the raider behavior of its leaders, actions preventing the country from making progress. The Ukrainian Government has annulled the license of Vanco Energy for oil prospecting in the Black Sea shelf, openly accusing this American oil company along with President Victor Yushchenko of holding secret negotiations with the Russia’s Gazprom. The Ukrainian Prime Minister and President have exchanged accusations: the President was said to be an “alleged threat to the national security”, while the Prime Minister was accused of “betraying national interests”.  

On May 8, the Ministry for Environmental Protection and Natural Resources of Ukraine annulled the special permit issued for subsoil use by Vanco Prykerchenska Ltd. (a subsidiary of the Vanco Energy Company) with the objective of geologic prospecting, including surveying and production development of mineral deposits with the subsequent oil and gas extraction in the Prykerchensky Subsoil Section of the Black Sea shelf. The area is on the Ukrainian shelf. This is listed in the corresponding ordinance by Georgy Filipchuk, Minister for Environmental Protection and Natural Resources of Ukraine. According to this Ordinance, the State Geological Service of Ukraine is obligated to take steps necessary to revoke the special permit for subsoil use.
The Vanco Company plans to sell the right for the Black Sea subsoil use to a third party, and perhaps, to Gazprom. This was mentioned on May 12 in a press briefing in Kiev by Yulia Timoshenko, the Ukrainian Prime Minister. Prime Minister Timoshenko stated that Vanco illegally obtained the license for the right of oil and gas extraction in the Prykerchensky Subsoil Section of the Black Sea shelf. According to her, the competitive tender was completed with violations of legislation. Timoshenko emphasized that Ukraine has given away “130 times more” than it would have been possible in any other country.
The government is not likely to change its position with regard to Vanсо. This was confirmed on May 19 by Alexander Turchinov, the first Vice Prime Minister. Turchinov noted, that “Vanсo shall not have any rights. We plan to revoke and terminate all documents, in their entirety, which could have supplied Vanсo with development rights. No stone would be left unturned.”
The Constitution Guarantor and Ukrainian President Victor Yushchenko is of a different opinion. He believes that the Government must suspend the resolution by Minpriroda (Ministry for Environmental Protection and Natural Resources) of Ukraine related to termination of the special permit for development of the Prykerchensky Subsoil Section of the Black Sea shelf issued to Vanco. This opinion of the President was expressed on May 14 by Andrei Goncharuk, the Deputy Chairman of Office of the President of Ukraine.
Such companies as Hunt Oil Company of Ukraine jointly with the Chernomorneftegaz, Shell jointly with ExxonMobil, and Turkiye Petrolleri A. O. jointly with Alfех One submitted their proposals for the competitive tender. The contract was awarded to a little known Swiss company – Vanco International Limited, a subsidiary of the Vanco Energy Company, located in the U.S.A.
Last April 15, at a press conference in Kiev representatives of the American Vanco Prykerchenska Ltd carefully responded to threats originating from the government of Yulia Timoshenko who earlier had not excluded the possibility of terminating contractual relations with the company for development of oil and gas deposits in the Black Sea shelf.
The Prykerchensky section (area of 12,960 sq. kilometers) is one of perspective but little studied portions of the Ukrainian deep water shelf with water depth from 300 to over 2,000 meters; the portion is located in the Ukrainian economic zone about 13 kilometers away from the shore line of the Kerch Peninsula.
Jean Van Dyke, the chairman of the company’s board of directors, renounced rumors on alleged negotiations wiith Gazprom on secession of prospecting rights for the Black Sea shelf.
Vanco Energy (USA) is specializing in geologic and geophysical surveying of perspective shelf sections, deep water drilling, oil, and gas extraction, as well as the proprietor of oil and gas deposits near African coastline.
According to Vanco’s CEO, the company began prospecting in the Black Sea shelf expecting to establish some major oil and gas deposits in the section, since, “geologically the conditions here are the same as in the Caspian Sea.” He emphasized that the Prykerchensky section (with the area of some 13,000 sq. kilometers, to which the company holds its license) is highly perspective yet remains little studied.
According to Van Dyke, “instead of its 80 percent dependence on energy imports, Ukraine will become independent in terms of energy supplies, and on top of that will be able to make huge money on selling this oil.”
On October 19, 2007, Vanco International signed the agreement with the Ukrainian Government on distribution of hydrocarbons extracted in the Prykerchensky section of the Black Sea’s continental shelf. The agreement provisions that at the exploratory and development stage, the American company’s shares would constitute 65 percent, while the Ukrainian share is 35 percent. At the same time, at the point of commenced industrial production, the parties will share by 50 percent. The agreement is signed effective for the period of 30 years. It is expected that Vanco International shall complete geological prospecting and extraction of 200 million tons of hydrocarbons.
According to the 2008 gas balance, in the current year, the country will consume 75 bcm of this fuel, with 55 bcm being imported, while 20 bcm is of domestic extraction. The level of annual oil consumption in Ukraine is some 20 million tons with the domestic extraction of some 4.5 million tons of oil and gas condensate. According to Van Dyke, in the North-Eastern section of the Crimean structure of the Black Sea shelf some 4 bbl of oil have been prospected (approx. 530 million tons). He advised that under provisions of the license agreement, after 10 years of work, the company will have to reverse all sections except for those where specific reserves are established. Vanco International planned to invest up to $2 billion into development of this shelf section. Its estimated gas reserves are 30 bcm, and several dozens of million tons of oil. From the executed 30-year agreement, Ukraine anticipates investments in the volume exceeding $15 billion to complete geologic prospecting and extraction of hydrocarbons as well as extraction of over 200 million tons of hydrocarbons. The project implementation is expected to ensure the additional income of over 200 billion hryvnas (some $40 billion) into the national budget along with the setup of several thousand new jobs.
Vanco is initiating international arbitration proceedings against the Government of Ukraine and deems the decree of the Ministry for Environmental Protection and Natural Resources of Ukraine to annul the special permits for subsoil use as illegal. This was stated by Jeffrey Mitchell, the Senior Vice President of the Vanco Energy Company at a press conference on May 12. He said that the Ukrainian Cabinet of Ministers does not fulfill its obligations undertaken according to the hydrocarbon distribution agreement related to future extractions within the limits of the Prykerchensky subsoil section of the Black Sea’s continental shelf. He emphasized that in accordance with the requirements provisioned by the arbitration agreement included in the hydrocarbon distribution agreement, Vanco had submitted the written demand for negotiations to the Cabinet of Ministers. This submission constitutes the first formal step for initiation of the arbitration proceedings. J. Mitchell said, that “if within 60 days of this date, the parties fail to reach an agreement, Vanco will have the right to file its claims with the Stockholm Chamber of Commerce Arbitration.” He also stated that in view of the current situation, the investment fund supported by the British line of the Rothschild family and ensuring funding of the project on behalf of his company may reconsider its investment plans, and within one week change to other partners.
Vanco opened up its pool of financial partners in implementation of the Prykerchensky project. The Company was forced to disclose this confidential information in response to extensive rumors on this subject. Jeffrey Mitchell, the Senior Vice President of the Vanco Energy Company addressed this issue at a press conference on May 15. He noted that the inventors’ pool included international investment companies and a major Ukrainian energy holding. Among financial partners of Vanco are DTEK, Integrum technologies Ltd. (the subsidiary of a large Austrian investment holding created for investment projects implemented in Eastern Europe and countries of the former Soviet Union), Shadowlight investments Ltd. (the investment company owned by Russian businessman Evgeniy Novitskiy, with its operations extending in the former Soviet Republics and members of the European Union, while Shadowlight company was established specifically with the objective of funding the projects in prospecting the Prykerchensky section of the Black Sea’s shelf.) in his turn, Maxim Timchenko, the general Director of DTEK, noted that the named investors participate in funding of this project in “approximately equal shares”. At the same time, Vanco remains the leading investor of the project. However, Prime Minister Yulia Timoshenko in her interview to the Ukrainian TV promised to name real founders of Vanco Prykerchenska (Virgin Islands) if President Victor Yushchenko continues insisting on restoration of the license for prospecting of the Prykerchensky section of the Black Sea’s shelf to this company.
Yuri Boyko, the Deputy Chairman of the Fuel and Energy Committee with the Verkhovna Rada (Parliament), said: “I believe that at this time annulment of the Vanco Energy’s license to develop subsoil resources is a sheer insanity. In reality, we demonstrate investors that Ukraine cannot be trusted as a business partner. Even if there are some issues, which is quite possible, they could have been resolved in the course of negotiations.” Boyko is certain that “it should not have been another PR show and re-privatization arranged, by the way, for the benefit of certain commercial structures rather than for the benefit of the state.”
That in the know hint to the fact that the government is making everything possible to transfer the project to another foreign investor which would be in collaboration with the Ukrainian oligarchs. Based on recent appointments in the energy sector, it could be either Igor Kolomoyskiy or Vitaly Gaiduk.
The National Security and Defense Council of Ukraine also obligated the Cabinet of Ministers of Ukraine to overrule the decision of the Ministry for Environmental Protection and Natural Resources of Ukraine on annulment of the special permit No. 3183 for subsoil use of December 5, 2007 issued to Vanco Prykerchenska Ltd. It is referred to in the decision of the Council of May 16, 2008, On Measures to Ensure the Development of Ukraine as a Marine Nation,” which was made effective by President of Ukraine Victor Yushchenko in his Decree of May 20.
And yet, in any case, William Taylor, the U.S. Ambassador, stated that he was “extremely disappointed by the fact that the Cabinet of Ministers unilaterally took steps to terminate the Agreement on Hydrocarbon Distribution executed between the American company Vanco and the Ukrainian Government.” It was reported by the press service of the US Embassy in Ukraine. Taylor noted, that “to attract investors, especially in the areas critically important for strategic safety, Ukraine must clearly demonstrate its respect for the contractual integrity and supremacy of the law.”
At the Energy Summit of the Krakow Consumer Club held in Kiev on May 22-23, the representative of Vanco spoke of his company’s intentions to go to court with the Government of Ukraine. And as early as on May 26, the Ministry for Environmental Protection and Natural Resources of Ukraine responded to Vanco, stating that they were ready to begin another round of negotiations on the dispute. No further comments, as they say.

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