OREANDA-NEWS. November 23, 2010. The Parliament of Ukraine has increased the rent for natural gas extraction in case the gas is extracted for purposes other than  to be supplied to households. Under the new tax code, the natural gas rent is to increase by 40% to UAH 140-280 per Mcm. Simultaneously, the Rada increased the rent for oil and gas condensate extraction by equivalent 40% to UAH 793-2,142 per ton.

Millennium Capital sees the news as NEGATIVE for oil & gas companies operating in Ukraine. Millennium Capital expects the changes will have a negative impact on corporate profits. In case of oil and gas condensate the correcting factor for the rent is calculated by the Ministry of Economy, based on Urals oil prices traded on LSE. In other words, the rent price is tied to the world oil price which is expected to increase by 6% (Bloomberg consensus forecast) in 2011. Therefore the rent for oil and gas condensate could be even higher than stated in the Law. Although higher rent increases the tax revenues from the sector, it may lead to further decline in oil and gas extraction in Ukraine going forward.