IDEAS home Printed from
   My bibliography  Save this article

Improvements of the approaches to royalties determination for the use of subsoil for natural gas recovery


  • Logatskiy V.


The aim of the article is to improve the taxation system of natural gas recovery in Ukraine. Author has systematized key characteristics of actual domestic natural gas reserves and resources, and features and conditions of natural gas recovery in Ukraine. In order to determine the actual rates of tax payments in fiscal sense for natural gas resources, the author proposes to distinguish the term of royalty as part of the rent as the term in economic sense and gives a schematic arrangement of distribution of the value received from the use of mineral resources. The author proposes an improvement of the current approaches to tax payments for natural gas recovery based on the determination of the royalty rate for each natural gas field (reservoir). Also, a correlation-regression model is built based on gas recovery cost interdependence from five key geological and operational factors (reserve size, depth of recovery, well flow rate, gas condensate factor, reservoir's life) for 133 natural gas fields under study. The array of these 133 reservoirs accounts for over 85% of Ukraine's gas recovery in 2013. The new approach is applied to royalty rates differentiation and determination for each gas reservoir from the array under study as option 1, and for other potential gas field based on the ranges of the affecting factors of the model as option 2. The author proposes calculation algorithms and formulas for royalty rates determination as share (%) of natural gas sales price as well as the price (value rate) for the natural unit of gas recovered (in currency for 1000 cubic meters). In order to prove the proposed approach, the author uses the examples of natural gas recovery operational expenses and royalty calculation by two described options for Yablunivske oil-gas condensate and natural gas field. In conclusions, the author formulates the main conditions and incentives to increase domestic natural gas recovery based on proposed improvement of royalty determination approach. The author recognizes that the proposed approach requires a large massive of data about expenses and prices of natural gas recovery and sales. At the same time, Ukraine is currently going to apply EITI principles whose implication will help to provide all necessary data for royalty rates determination.

Suggested Citation

  • Logatskiy V., 2015. "Improvements of the approaches to royalties determination for the use of subsoil for natural gas recovery," Economy and Forecasting, Valeriy Heyets, issue 3, pages 58-70.
  • Handle: RePEc:eip:journl:y:2015:i:3:p:58-70

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eip:journl:y:2015:i:3:p:58-70. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Iryna Bazhal). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.