НАК „НАФТОГАЗ УКРАЇНИ“. Річний звіт англійською (2017 рік) - 13

 

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НАК „НАФТОГАЗ УКРАЇНИ“. Річний звіт англійською (2017 рік) - 13

 

 

OUR RESPONSIBILITY

ANNUAL REPORT 2017

197

196

tightness of shut-off valves, 

pipelines and other GTS 

equipment using mobile 

laboratories able to detect 

and eliminate natural gas leaks 

in GTS equipment. In 2017, 

Ukrtransgaz began operating 

a mobile compressor station 

which allows, during repairs on 

the gas pipeline, to minimize 

the amount of natural gas 

that is bleeded into the 

atmosphere and transfer it into 

a leakproof system. During the 

first application of the mobile 

compressor, 1.3 mcm of natural 

gas was saved. 

Rational use of water resources

The use of water by the 

enterprises of the company 

decreased by 30.4% in 2017 

compared to the previous year 

and amounted to 4.42 mcm, 

with a total water withdrawal 

of 5.3 mcm. During the year, 

1.7 mcm of reverse (sewage) 

waters were treated.

2.6 mcm have been withdrawn 

from the surface water sources, 

which is about 59% of the total 

used water; the underground 

water intake amounted to 

1.2 mcm (27%); intake from 

communal water supply was 

0.6 mcm (13%), with drainage 

water of 0.005 mcm (less 

than 1%).

Water intake was for production 

and technological needs, as well 

as the drinking, sanitary and 

hygienic needs of workers.

In addition, 9.1 mcm of 

associated water was produced 

in the process of extraction of 

hydrocarbons.

During 2017, 325 621 tcm of 

wastewater was treated at 

biological treatment plants, 

10.7 tcm at physical and chemical 

treatment facilities, and 88.5 tcm 

at mechanical sewage treatment 

facilities.

The volume of water used by 

the enterprises of the group in 

recycling supply systems in 2017 

amounted to 5.04 mcm: 

•  Ukrtransgaz – 32.6 mcm

•  Ukrnafta – 137.3 mcm

•  Ukrgazvydobuvannya –

24.5 mcm 

•  Ukrspetstransgaz – 0.04 mcm

The volume of water used by the 

enterprises of the group in the 

formation-pressure maintenance 

systems at Ukrnafta amounted to 

5.04 mcm. 

9.2 mcm of associated 

water was returned to the 

underground horizons during 

2017: 0.2 mcm of associated 

water was pumped into wells 

at the Ukrhazvydobuvannya 

production facilities and 

8.96 mcm at Ukrnafta facilities. 

The use of this method 

significantly mitigates the 

negative impact on surface 

water objects and groundwater. 

It partially restores the natural 

conditions of the areas of 

subsoil that are provided for 

use for oil and gas production 

purposes and contributes to the 

conservation of land.

In 2017, Ukrnafta renewed the 

embanking of reservoirs and 

wells (226 items altogether). It 

replaced, revised, and repaired 

373 safety breathing valves of 

tanks and apparatus, audited 

and replaced 326 sliding 

valves on waterways and 29 

water meters, and assessed 

the state of 88 operational 

columns of oil and injection 

wells. In addition, the company 

liquidated and reclaimed 19 

oil, earth and other barns and 

reservoirs.

Every year Ukrnafta develops 

and implements "Measures to 

Mitigate the Consequences of 

Long-Term Extraction of Oil and 

Gas and Reduce Environmental 

Pollution in Boryslav town". As 

of 1 January 2018, Ukrnafta 

had spent UAH 31.4 million 

on implementation of 

measures in 2017. This 

included UAH 1.3 million on 

monitoring and preventive 

measures, UAH 15.7 million 

on repair and isolation works, 

and UAH 14.2 million spent on 

exploitation and reconstruction 

of objects connected with the 

liquidation of gas pollution of 

the city, with UAH 0.3 million 

on research.

In 2017, Ukrtransgaz conducted 

1527 environmental and heat 

engineering examinations, which 

allowed control of compliance 

of the effective indicators of 

fuel-using equipment with the 

specifications in the technical 

passports and technological 

regulations. For the purposes of 

obtaining permit documentation, 

an inventory of 1835 stationary 

sources of emissions was 

conducted. Substantiating 

materials were prepared and 

an expert examination of 556 

project materials was conducted.

   Use of water resources by Naftogaz group in 2015-2017, tcm

 Total water resources used

2015

2016

2017

% 2017 compared to 2016

Total, including*:

7 017.2

6 369.9

4 418.5

-30.4

Ukrtransgaz

708.6

680.3

645.4

-5.1

Ukrnafta

3 081.7

3 361.3

2 650.0

-21.2

Ukrgazvydobuvannya

2 229.2

2 131.5

947.8

-55.5

Ukrtransnafta

171.99

179.1

168.6

-5.9

Waste management

The total amount of waste 

generated at the enterprises 

of Naftogaz group in 2017 

amounted to 210.1 thousand 

tons, including:

•  waste of hazard class I –

0.075 thousand tons, which 

is less than 1% of the total 

generated waste. Among 

the class I waste, the most 

common items are spent 

fluorescent lamps, lead 

batteries and accumulators. 

All class I waste is transported 

for further environmentally 

sound disposal to specialized 

enterprises on a contractual 

basis. In addition, most 

companies in the group and 

the company's head office 

arranged collection of spent 

batteries and fluorescent lamps 

from all interested persons;

•  waste of hazard class II –

0.4 thousand tons (less than 

1%). Among the waste of 

class II, the most common items 

are used oils and lubricants 

(284.1 tons accumulated), and 

accumulator batteries – 59 tons;

•  waste of hazard class III –

12.4 thousand tons (about 

6%). The most widespread 

waste of hazard class III at 

the enterprises of Naftogaz 

group that emerged in 2017 is 

spent petroleum products and 

petroleum products totaling 

8098.8 tons.

•  waste of hazard class IV –

197.3 tons (about 94%). Hazard 

class IV includes the following 

main types of waste: drilling 

sludge (drilled solids, spent 

drilling mud and drilling 

wastewater) – 147.2 thousand 

tons; household mixed waste – 

24.1 thousand tons; scrap of 

ferrous metals – 6.1 thousand 

tons; automobile tires worked 

out and damaged – 0.7 thousand 

tons; construction waste – 

0.5 thousand tons; agricultural 

waste (various) – 0.2 thousand 

tons and other waste generated 

mainly via construction, drilling, 

extraction, transportation, storage 

and of oil and gas processing 

facilities.

Ukrnafta has all the appropriate 

permits and equipment for 

the disposal of hazardous oil-

containing waste at its own 

facilities. Due to the use of special 

equipment for processing oil 

slime plants, spent petroleum 

products, and stable oil 

emulsions, Ukrnafta utilized 

*Including other enterprises of the group

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OUR RESPONSIBILITY

ANNUAL REPORT 2017

199

198

1.5 thousand tons of oil sludge in 

2017, and 20.3 thousand tons of 

previously accumulated oil sludge 

in the period from 2012 to 2017. 

As a result, in 2017 the volume of 

oil-containing waste decreased 

by 17.1% and several thousand 

tons of oil and oil products were 

extracted additionally.

As of 1 January 2018, 

12.3 thousand tons of oil-

containing waste was stored in 

the temporary waste storages 

of the enterprises of the group, 

which is by 25.3 thousand tons 

less compared with the previous 

period. 

   Structure of waste generated by Naftogaz companies, by hazard class, 2015-2017, thousand tons

Total waste generated at the enterprises of Naftogaz group

2015

2016

2017

including:

102.5

85.4

210.1

hazard class І 

0.1

0.1

0.1

hazard class ІІ 

0.9

0.3

0.4

hazard class ІІІ 

8.0

5.9

12.4

hazard class ІV 

93.5

79.1

197.3

The increase in waste generation 

in 2017 was mainly due to 

an increase in production, 

in particular an increase in 

the volume of drilling at 

Ukrgazvydobuvannya by 21.2%, 

which resulted in a significant 

increase in the generation of 

waste of third and fourth hazard 

classes (drilling waste and oil-

containing waste) 

The company is not engaged 

in any trans-boundary 

transportation of waste. It does 

not import or export waste 

categorized as dangerous in 

accordance with the Basel 

Convention.

   Waste management at the enterprises of Naftogaz group, 2015-2017, thousand tons

2015

2016

2017

Volume of generated waste

102.5

85.4

210.1

Volume of waste removed from facilities

4.5

0.00005

152.7

Volume of waste utilized and disposed of

51.3

49.3

1.9*

Volume of waste transferred to specialized organizations

60.9

38.1

53.0

*   Reducing the volume of waste utilization or disposal was due to the reduction in waste volumes temporarily placed on production facilities of the company

Emergencies prevention and mitigation measures 

During 2017, 15 emergencies 

at the company's production 

facilities resulted in excessive 

pollution of the environment, 

especially land pollution. The 

total area of contaminated 

land, according to information 

received from the enterprises 

of the group, amounted to 

about 9 360 sq.m. The issue of 

environmental pollution has 

been repeatedly addressed by 

the company’s commission for 

emergency situations in 2017. 

Moreover, since individual 

cases drew public attention, 

the Naftogaz supervisory board 

at a meeting in September 

2018 (No.19/2017) decided to 

take appropriate measures and 

instruct the chairman of the 

board to personally inform the 

committee on occupational 

safety, environmental and 

industrial safety of the high-

profile events and significant 

negative impact on the 

environment due to emergency 

situations. In addition, relevant 

changes have been introduced 

to the company's regulatory 

documents regarding 

environmental pollution 

notification regulations.

In 2017, the enterprises of the 

group carried out a monitoring 

survey of pollution in the 

environment of Mashivsky 

region in the vicinity of 

Mashivsky LNG processing 

facility, Andriivska technogenic 

pollution zone and wells No 81 

in East-Poltava gas condensate 

field (GCF).

•  Implementation of the Environmental Protection and Social Action Plan, which is an annex to the loan doc-

umentation for attracting financing with IBRD guarantees (approved by the minutes of the board meeting 

dated 12 May 2017, No. 191), which will allow to bring the standards of Naftogaz group as close as possible 

to the environmental and social requirements of international financial organizations;

•  conducting an external third-party assessment of Naftogaz's environmental management system, con-

firming compliance of the company’s operations with the requirements of the international standard ISO 

14001:2015 and obtaining an appropriate international certificate;

•  implementation of the World Bank Pilot Project and the launch of a GHG emissions monitoring, reporting 

and verification system at individual facilities;

•  development of technological norms for permissible emission of pollutants for medium combustion plants 

for the oil and gas industry of Ukraine.

Plans for 2018 

1. Implementation of EU Directives. 

The MCP (Medium Combustion Plant) Directive regulates pollutant 

emissions from combustion of fuels in installations with rated thermal input capacity equal to or greater 

than 1 MW and less than 50 MW ("medium combustion plants"). The gas-driven internal combustion 

compressors and gas-pumping units used at enterprises of the company are out of date and will not 

be able to comply with the norm established by the Ministry of Environmental Protection of Ukraine on 

emissions: 500 mg /m

3

 for NOx and 250 mg /m

3

 for CO. Replacement or upgrading programs are in the 

process of implementation but at a low rate due to the need for significant funding. However, it should 

be noted that EU requirements for such equipment are even tighter (100 mg/m

3

 for NOx and 50 mg/m

3

 

for CO). To solve the problem, the existing gas-driven internal combustion compressors and gas-pumping 

units shall be fully replaced and the interim technological standards for the permissible emission of 

pollutants shall be developed.

2. Gaps in Ukrainian legislation. 

There is a lack of bylaws to implement the requirements of the current 

legislation, namely:
–  there is a delay in the implementation of certain provisions of the EU agreement;
–  since 2015, no bylaws have been adopted for the implementation of the provisions of the Law of Ukraine 

"On Waste", in terms of developing a procedure for obtaining permits for waste management operations;

–  there is no regulation in place that defines the hazard classes of waste, since the State Sanitary Norm 

and Rule 2.2.7.029-99 "Hygienic requirements with regard to industrial waste management and defini-

tion of class of hazard for public health" is suspended. Without determining the hazard classes of waste, 

companies cannot calculate the total waste generation rate, take waste inventories, or submit a Decla-

ration of Waste;

–  information in the list of licensors for conducting economic activities in dealing with hazardous waste 

that is posted on the website of the Ministry of Environmental Protection of Ukraine is not up to date;

–  there is no state automated system, with the required software, technical and telecommunication 

infrastructure for the automated measuring of extracted underground water;

–  the implementation of certain provisions of the Law of Ukraine "On Environmental Impact Assessment" 

is not sufficiently regulated in terms of obtaining permits for subsoil plots.

3. Insufficient staff resources

 (lack of personnel at environmental safety services) at some industrial facili-

ties of the company’s enterprises.

4. Pollution

 of the environment with hydrocarbons and associated water as a result of use of obsolete 

equipment and unauthorized interference by unauthorized persons.

Environmental protection challenges and risks 

-------------------------------------------------------------------------------------------------------------------------------------------------------------

ANNUAL REPORT 2017

201

FINANCIAL 

STATEMENTS

 

2012

2013

2014

2015

2016

2017

BALANCE 

SHEET

Disclaimer 
of opinion

6 qualifications 
(56% of total 
assets value)

1 qualification 
(2% of total 
assets value)

3 qualification 
(2% of total 
assets value)

3 qualifications 
(2% of total 
assets value)

1 qualification 
(0.2% of total 
assets value)

PROFIT AND 

LOSS

Disclaimer 
of opinion

Disclaimer 
of opinion

6 qualifications 
(38% of net loss)

3 qualifications 
(9% of net loss)

3 qualifications 
(53% of net 
profit)

1 qualifications 
(0.3% of net 
profit)

The independent auditor expressed a qualified opinion on Naftogaz financial position and financial 

performance for 2017. Major part of the modifications in the auditors’ report does not have significant 

impact on the financial statements 2017 and relate to comparability of the current year and the 

corresponding figures.

AUDITOR’S QUALIFICATIONS AND RELATED COMMENTS

Auditor’s qualification  

(the qualification number in the auditor’s report  

indicated in brackets)

Effect on:

Management comments

Statement 

of financial 

position as at 31 

December 2017

Statement 

of profit or 

loss 2017

Matters that affect 2017 or both years:

Investment in joint operation:
Use of different accounting policies by the group and 
the group’s associates and joint operations;  lack of 
audited financial information of joint operation (1)

yes 
(less than 1% of 
assets)

yes
(less than 
1% of net 
profit)

Management expects this 
joint operation agreement to 
be terminated by the Court 
in 2018. After the Final Court 
decision on termination of 
the agreement is received, the 
Group will deconsolidate this 
investee.

Matters related to prior periods that affect comparability of the current year and the corresponding figures:

Technical accounting issues:
•  Use of different accounting policies by the group and

the group’s associates and joint operations (2)

no

no

Auditor’s comments relate to 
previous reporting periods and 
do not impact the financial 
results and financial position 
of 2017.

Management has taken 
measures to avoid the impact 
of these issues on the group’s 
results in 2017, in particular 
– performed adjustment in 
respect of accounts receivables 
and prepayments made by 
“Ukrnafta” PJSC in 2015; as 
well as improved control 
over purchases at the group’s 
subsidiaries.

•  Unconfirmed quantities and valuation of inventories

owned by the joint operation of Ukrnafta as of 31 
December 2015 (3c)

no

no

Financial information of “Ukrnafta” PJSC:
Lack of sufficient audit evidence that supports 
recognition and measurement of Ukrnafta’s transactions 
regarding:
•  sales of petroleum products by the joint operation in

2016,

•  trade accounts receivables related to sales of crude oil

in 2015; 

•  prepayments made for the purchases of oil products

in 2015 and their classification,

as well as impact of these transactions on other 
operating expenses, finance income and deferred tax 
assets as at 31 December 2016 (3а,b)

no

no

Presentation and accuracy of the consolidated 

financial statements:
Nature of certain expenses may not be reflected in 
their legal form. Exposure to this issue amounts to 
UAH 6.2 billion for 2016 (4)

no

no

-------------------------------------------------------------------------------------------------------------------------------------------------------------

FINANCIAL STATEMENTS

ANNUAL REPORT 2017

203

202

PUBLIC JOINT STOCK COMPANY 

“NATIONAL JOINT STOCK COMPANY 

“NAFTOGAZ OF UKRAINE”

CONSOLIDATED FINANCIAL STATEMENTS 
AS AT AND FOR THE YEAR ENDED 
31 DECEMBER 2017

CONTENTS

 Page

INDEPENDENT AUDITOR’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Consolidated Statement of Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Consolidated Statement of Comprehensive Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Consolidated Statement of Changes in Equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Consolidated Statement of Cash Flows  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.  The Organisation and its Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
2.  Operating Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
3.  Restatement of Comparative Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
4.  Segment Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
5.  Balances and Transactions with Related Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
6.  Property, Plant and Equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
7.  Investments in Associates and Joint Ventures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
8.  Other Non-Current Assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
9. Inventories  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
10.  Trade Accounts Receivable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
11.  Prepayments Made and Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
12.  Cash and Bank Balances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
13.  Share Capital  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
14. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
15. Provisions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
16.  Advances Received and other current liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
17.  Cost of Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
18.  Other Operating income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
19.  Other Operating Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
20.  Finance Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
21.  Finance Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
22.  Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
23.  Contingencies, Commitments and Operating Risks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
24.  Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
25.  Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
26.  Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
27.  Summary of Significant Accounting Policies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
28.  Critical Accounting Estimates and Judgements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
29.  Adoption of New or Revised Standards and Interpretations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

-------------------------------------------------------------------------------------------------------------------------------------------------------------

FINANCIAL STATEMENTS

ANNUAL REPORT 2017

205

204

INDEPENDENT AUDITOR’S REPORT

To the shareholder of Pub-

lic Joint Stock Company 

“National Joint Stock Company 

“Naftogaz of Ukraine”:

Qualified Opinion

We have audited the 

consolidated financial 

statements of Public Joint 

Stock Company “National Joint 

Stock Company “Naftogaz of 

Ukraine” and its subsidiaries 

(the “Group”), which comprise 

the consolidated statement 

of financial position as at 

31 December 2017, and the 

consolidated statement of 

profit or loss, consolidated 

statement of comprehensive 

income, consolidated statement 

of changes in equity and 

consolidated statement of cash 

flows for the year then ended, 

and notes to the consolidated 

financial statements, including 

a summary of significant 

accounting policies.

In our opinion, except for the 

possible effects of the matters 

described in the paragraphs 1a, 

3 and 4 of the Basis for Qualified 

Opinion section of our report, 

and except for the effects 

of the matters described in 

the paragraphs 1b and 2 of the 

Basis for Qualified Opinion section 

of our report, the accompanying 

consolidated financial statements 

present fairly, in all material 

respects, the consolidated 

financial position of the Group 

as at 31 December 2017, and 

its consolidated financial 

performance and its consolidated 

cash flows for the year then 

ended in accordance with 

International Financial Reporting 

Standards (“IFRSs”).

Basis for Qualified Opinion

Matters that affect the current 

year or both years

1) Investment in joint operation

As discussed in Notes 7 and 27 

to the consolidated financial 

statements, the Group’s 

subsidiary “Ukrgazvydobuvannya” 

PJSC has investment in joint 

operation with Misen Enterprises 

AB and LLC “Carpatygaz”. 

This investment is accounted 

for using the method of 

proportional consolidation. We 

were unable to: 

a.  Obtain sufficient and 

appropriate audit evidence 

regarding the Group’s share in 

assets, liabilities, revenue and 

expenses of joint operation, as 

other party of the joint operation 

is responsible for maintaining 

accounting records and we were 

unable to obtain access to their 

audited financial statements and 

financial information prepared 

in accordance with IFRS as at 

31 December 2017 and 2016 

and for the years then ended as 

presented below:

Line item in the consolidated financial statements

31 December 2017, 

UAH million

31 December 2016, 

UAH million

Consolidated statement of financial position as at:

Property, plant and equipment

1,456

1,540

Other non-current assets

3

3

Inventories

1

130

Trade accounts receivable

80

60

Cash and bank balances

1

14

Prepayments made and other current assets

57

58

Borrowings

95

90

Provisions

122

111

Trade accounts payable

47

50

Advances received and other current liabilities

2

109

Consolidated statement of profit or loss for the year ended:

Revenue

5

1,712

Cost of sales

(116)

(1,472)

b.  Determine the effect of the 

departure from the uniform 

accounting policy of the Group 

to use the revaluation model for 

measurement of property, plant 

and equipment by the joint oper-

ation as at 31 December 2017 and 

2016.

Matters related to prior periods 

that affect comparability of the 

current year and the correspond-

ing figures

2) Investments in associates and 

joint operations

As discussed in Notes 7 and 27 to 

the consolidated financial state-

ments, the Group has investments 

in associates and joint arrange-

ments, which are accounted 

for using the equity method of 

investment. We were unable to:

a.  Determine the effect of the 

departure from IFRS 11 “Joint 

Arrangements” as the Group’s 

investments in joint arrangements 

stated at UAH 40 million as at 31 

December 2016 were accounted 

for using the equity method. In 

our opinion, these investments 

should have been accounted for 

as joint operations that requires 

recognition by the Group of its 

share in each category of assets 

and liabilities of the joint opera-

tions as at 31 December 2016 and 

its share in the joint operations’ 

revenues and expenses for the 

year then ended. 

b.  Determine the effect of the 

departure from the uniform 

accounting policy of the Group 

to use the revaluation model for 

measurement of property, plant 

and equipment by PJSC “Ukrtat-

nafta” as at 31 December 2016 

and for the year then ended.

Our audit opinion on the consoli-

dated financial statements for the 

year ended 31 December 2016 

was modified accordingly. Our 

opinion on the current period’s 
consolidated financial statements 
is also modified because of the 
possible effects of these matters 
on the comparability of the 
current period’s figures and the 
corresponding figures.

3) Financial information of 

“Ukrnafta” PJSC

We were unable to obtain suffi-
cient and appropriate audit evi-
dence regarding: 

a.  In 2015 “Ukrnafta” PJSC 
(“Ukrnafta”) made prepayments for 
the purchases of oil products with 
a contractual delivery in December 
2018 and sold crude oil with the 
payment expected in December 
2016. As at 31 December 2016 the 
Group recognised provision for 
impairment in full amount of the 
respective trade accounts receiv-
able and prepayments which 
remained unsettled as at that 
date. As a result, we were unable 
to obtain sufficient and appro-
priate audit evidence regarding 
recognition and measurement of 
respective trade accounts receiv-
able and prepayments made as 
at 31 December 2015, as well as 
impact of these transactions on 
other operating expenses, finance 
income, including any tax conse-
quences and other related consol-
idated financial statements effects 
for the year ended 31 December 
2016.

b.  Recognition and measure-
ment of revenue, cost of sales, 
other operating expenses and 
other related effects on the con-
solidated financial statements 
with respect to sales of petroleum 
products by the joint operation of 
Ukrnafta in 2016.

c.  Quantities and valuation of 
inventories in the amount of UAH 
1,191 million owned by the joint 
operation of Ukrnafta and held by 

a third party as at 31 December 
2015, as we could not observe the 
counting of physical inventories 
or satisfy ourselves by alternative 
means concerning the inventory 
quantities as of that date.

As a result, we were unable to 
determine whether any adjust-
ments to the following amounts 
related to Ukrnafta were nec-
essary for the year ended 31 
December 2016: 

Consolidated statement 

of profit or loss

UAH 

million

Revenue

771

Cost of sales

(1,662)

Other operating 
expenses

(13,600)

Finance income

1,570

Income tax expense

(2,131)

Our audit opinion on the consoli-
dated financial statements for the 
year ended 31 December 2016 
was modified accordingly. Our 
opinion on the current period’s 
consolidated financial statements 
is also modified because of the 
possible effects of these matters 
on the comparability of the 
current period’s figures and the 
corresponding figures.

4) Purchases classification and 

presentation

As discussed in Note 27, the 
following expenditures were 
incurred by “Ukrtransgaz” PJSC 
during the year ended 31 Decem-
ber 2016: 

 

Capital expenditures included 
into property, plant and 
equipment amounting to 
UAH 1,872 million; and

 

Expenditures for purchases 
of services and inventories 
amounting to UAH 4,279 mil-
lion.

As further stated in Note 
27, the substance of these 

-------------------------------------------------------------------------------------------------------------------------------------------------------------

FINANCIAL STATEMENTS

ANNUAL REPORT 2017

207

206

expenditures may differ from 
their legal form according 
to the primary documents. 
We were unable to obtain 
sufficient and appropriate audit 
evidence to satisfy ourselves 
as to the amounts and nature 
of the above expenditures 
and their classification in 
the consolidated financial 
statements for the year 
ended 31 December 2016. 
Consequently, we were unable 
to determine whether any 
adjustments to these amounts 
were necessary. Our audit 
opinion on the consolidated 
financial statements for the 
year ended 31 December 2016 
was modified accordingly. 
Our opinion on the current 
period’s consolidated financial 
statements is also modified 
because of the possible 
effect of this matter on the 
comparability of the current 
period’s figures and the 
corresponding figures.

We conducted our audit in 
accordance with International 
Standards on Auditing (“ISAs”). 
Our responsibilities under those 
standards are further described 
in the Auditor’s Responsibilities 
for the Audit of the Consolidated 
Financial Statements
 section of 
our report. We are independent 
of the Group in accordance 
with the International 
Ethics Standards Board for 
Accountants’ Code of Ethics 
for Professional Accountants
 
(the “IESBA Code”) together 
with the ethical requirements 
that are relevant to our audit 
of the consolidated financial 
statements in Ukraine, and we 
have fulfilled our other ethical 
responsibilities in accordance 
with these requirements and 
the IESBA Code. We believe 
that the audit evidence we 
have obtained is sufficient and 
appropriate to provide a basis 
for our qualified opinion.

Emphasis of Matters

Operating environment 

We draw your attention to Note 
2 to the consolidated financial 
statements, which describes that 
the impact of the continuing 
economic crisis and political 
turmoil in Ukraine and their final 
resolution are unpredictable and 
may adversely affect the Ukrainian 
economy and the operations of 
the Group. Our opinion is not 
modified in respect of this matter.

Ongoing litigations

We also draw your attention to 
Note 23 to the consolidated finan-
cial statements, which describes 
decisions of the Arbitration Insti-
tute of the Stockholm Chamber 
of Commerce with regard to the 
claims between the Company 
and JSC “Gazprom” and mate-
rial uncertainty regarding final 
resolution of contentious issues 
between the Company and JSC 
“Gazprom”. Our opinion is not 
modified in respect of this matter. 

Retrospective restatement

We further draw attention to Note 
3 to the consolidated financial 
statements which describes the 
restatement of corresponding 
figures for the year ended 31 
December 2016. Our opinion is 
not modified in respect of this 
matter.

Responsibilities of Manage-

ment and Those Charged with 

Governance for the Consoli-

dated Financial Statements

Management is responsible for 
the preparation and fair presenta-
tion of the consolidated financial 
statements in accordance with 
IFRS, and for such internal control 
as management determines is 
necessary to enable the prepa-
ration of consolidated financial 

statements that are free from 
material misstatement, whether 
due to fraud or error.

In preparing the consolidated 
financial statements, manage-
ment is responsible for assessing 
the Group’s ability to continue 
as a going concern, disclosing, 
as applicable, matters related to 
going concern and using the 
going concern basis of account-
ing unless management either 
intends to liquidate the Group 
or to cease operations, or has no 
realistic alternative but to do so. 

Those charged with governance 
are responsible for overseeing 
the Group’s financial reporting 
process.

Auditor’s Responsibilities for 

the Audit of the Consolidated 

Financial Statements

Our objectives are to obtain 
reasonable assurance about 
whether the consolidated 
financial statements as a 
whole are free from material 
misstatement, whether due to 
fraud or error, and to issue an 
auditor’s report that includes our 
opinion. Reasonable assurance 
is a high level of assurance, but 
is not a guarantee that an audit 
conducted in accordance with 
ISAs will always detect a material 
misstatement when it exists. 
Misstatements can arise from 
fraud or error and are considered 
material if, individually or in the 
aggregate, they could reasonably 
be expected to influence 
the economic decisions of 
users taken on the basis of 
these consolidated financial 
statements. 

As part of an audit in accordance 
with ISAs, we exercise professional 
judgment and maintain profes-
sional scepticism throughout the 
audit. We also: 

 

Identify and assess the risks 

of material misstatement of 

the consolidated financial 

statements, whether due to 

fraud or error, design and 

perform audit procedures 

responsive to those risks, and 

obtain audit evidence that is 

sufficient and appropriate to 

provide a basis for our opin-

ion. The risk of not detecting 

a material misstatement 

resulting from fraud is higher 

than for one resulting from 

error, as fraud may involve 

collusion, forgery, intentional 

omissions, misrepresenta-

tions, or the override of inter-

nal control.

 

Obtain an understanding of 

internal control relevant to 

the audit in order to design 

audit procedures that are 

appropriate in the circum-

stances, but not for the pur-

pose of expressing an opin-

ion on the effectiveness of 

the Group’s internal control. 

 

Evaluate the appropriateness 

of accounting policies used 

and the reasonableness of 

accounting estimates and 

related disclosures made by 

management. 

 

Conclude on the appropri-

ateness of management’s use 

of the going concern basis 

of accounting and, based on 

the audit evidence obtained, 

whether a material uncertainty 

exists related to events or 

conditions that may cast sig-

nificant doubt on the Group’s 

ability to continue as a going 

concern. If we conclude that a 

material uncertainty exists, we 

are required to draw attention 

in our auditor’s report to the 

related disclosures in the con-

solidated financial statements 

or, if such disclosures are inad-

equate, to modify our opinion. 

Our conclusions are based on 

the audit evidence obtained 

up to the date of our auditor’s 

report. However, future events 

or conditions may cause the 

Group to cease to continue as 

a going concern.

 

Evaluate the overall 

presentation, structure and 

content of the consolidated 

financial statements, 

including the disclosures, and 

whether the consolidated 

financial statements 

represent the underlying 

transactions and events in 

a manner that achieves fair 

presentation. 

 

Obtain sufficient appropriate 

audit evidence regarding 

the financial information 

of the entities or business 

activities within the Group 

to express an opinion on 

the consolidated financial 

statements. We are 

responsible for the direction, 

supervision and performance 

of the group audit. We remain 

solely responsible for our 

audit opinion. 

We communicate with those 

charged with governance 

regarding, among other matters, 

the planned scope and timing 

of the audit and significant 

audit findings, including any 

significant deficiencies in 

internal control that we identify 

during our audit. 

16 May 2018

PJSC Deloitte and Touche

-------------------------------------------------------------------------------------------------------------------------------------------------------------

FINANCIAL STATEMENTS

ANNUAL REPORT 2017

209

208

PUBLIC JOINT STOCK COMPANY “NATIONAL JOINT STOCK COMPANY “NAFTOGAZ OF UKRAINE” 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

In millions of Ukrainian hryvnias

Note 31 December 2017

31 December 2016 

(as restated, Note 3)

ASSETS

Non-current assets
Property, plant and equipment

6

491,482

551,661

Investments in associates and joint ventures

7

1,197

1,328

Prepaid corporate income tax 

 – 

1,317

Deferred tax assets

22

4,204

4,508

Other non-current assets

8

11,131

9,326

Total non-current assets

508,014

568,140

Current assets
Inventories

9

60,175

50,244

Trade accounts receivable

10

58,988

49,209

Prepayments made and other current assets

11

71,247

9,499

Prepaid corporate income tax

16

22

Cash and bank balances

12

23,093

22,336

Restricted cash

1,591

680

Total current assets

215,110

131,990

TOTAL ASSETS

723,124

700,130

EQUITY

Share capital

13

194,307

164,607

Revaluation reserve

411,261

437,510

Unregistered contributed capital

13

 – 

29,700

Cumulative exchange difference

3,462

3,164

Accumulated deficit

(168,057)

(178,214)

Equity attributable to owners of the Parent

440,973

456,767

Non-controlling interest in equity

(454)

(1,177)

TOTAL EQUITY

440,519

455,590

LIABILITIES

Non-current liabilities
Borrowings

14

14,736

23,100

Provisions

15

6,007

12,416

Deferred tax liabilities

22

67,304

82,312

Other long-term liabilities

12

4

Total non-current liabilities

88,059

117,832

Current liabilities
Borrowings

14

44,579

47,744

Provisions

15

52,551

31,116

Trade accounts payable

8,137

16,234

Advances received and other current liabilities

16

78,608

28,327

Corporate income tax payable

10,671

3,287

Total current liabilities

194,546

126,708

TOTAL LIABILITIES

282,605

244,540

TOTAL LIABIITIES AND EQUITY

723,124

700,130

These consolidated financial statements were authorised for issue on 8 May 2018. 
Andriy 

Kobolyev     Sergiy 

Konovets 

Chairman of the Executive Board  

 

 

Deputy Chairman of the Executive Board

PUBLIC JOINT STOCK COMPANY “NATIONAL JOINT STOCK COMPANY “NAFTOGAZ OF UKRAINE” 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2017

In millions of Ukrainian hryvnias

Note

2017

2016 

(as restated, Note 3)

Revenue

4

227,478

192,764

Cost of sales

17

(157,147)

(121,804)

Gross profit

70,331

70,960

Other operating income

18

5,092

2,627

Income recognised per results of Gas Transit Arbitration

11, 23

57,125

Other operating expenses

19

(27,475)

(45,545)

Expense recognised per results of Gas Sales Arbitration

16, 23

(44,528)

Operating profit

60,545

28,042

Finance costs

20

(8,302)

(9,581)

Finance income

21

1,598

5,913

Share of after-tax results of associates and joint-ventures

7

(47)

(99)

Net foreign exchange loss

(1,043)

(5,790)

Profit before income tax

52,751

18,485

Income tax expenses

22

(13,302)

(636)

Net profit for the year

39,449

17,849

Net profit/(loss) is attributable to:

Equity holders of the Company

39,644

24,311

Non-controlling interest

(195)

(6,462)

Net profit for the year

39,449

17,849

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FINANCIAL STATEMENTS

ANNUAL REPORT 2017

211

210

PUBLIC JOINT STOCK COMPANY “NATIONAL JOINT STOCK COMPANY “NAFTOGAZ OF UKRAINE” 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

In millions of Ukrainian hryvnias

Note

2017

2016

(as restated, Note 3) 

Net profit for the year

39,449

17,849

Other comprehensive (loss)/income

Items that will not be reclassified subsequently to profit or 

loss, net of income tax:

(Loss)/gain on revaluation of property, plant and 
equipment (net of income tax of UAH 5,488 million (2016: 
UAH 1,585 million)

(24,907)

7,221

Share of other comprehensive income of associates (net of 
income tax of nil (2016: nil)

7

 – 

2

Remeasurement of defined benefit obligation (net of income 
tax of UAH 68 million (2016: UAH 31 million)

15

(312)

(142)

Remeasurement of decommissioning liability (net of income tax 
of UAH 24 million (2016: UAH 21 million)

15

(115)

(95)

Items that may be reclassified subsequently to profit or loss, 

net of income tax:

Cumulative exchange difference

298

1,078

Other comprehensive (loss)/income for the year

(25,036)

8,064

Total comprehensive income for the year

14,413

25,913

Total comprehensive income/(loss) is attributable to:

Equity holder of the Company

13,697

32,477

Non-controlling interests

716

(6,564)

Total comprehensive income for the year

14,413

25,913

PUBLIC JOINT STOCK COMPANY “NATIONAL JOINT STOCK COMPANY “NAFTOGAZ OF UKRAINE” 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2017

In millions of Ukrainian hryvnias

Share 

capital

Reval-

uation 

reserve

Unreg-

istered 

contrib-

uted 

capital

Cumu-

lative 

exchange 

differ-

ence

Accu-

mulated 

deficit

Total

Non-con-

trolling 

interest

Total 

equity

Balance at 

31 December 2015

 164,607   430,503   29,700 

 2,086  (188,421)  438,475 

 5,287   443,762 

Profit/(loss) for the year

 – 

 – 

 – 

 – 

24,311

24,311

(6,462)

17,849

Other comprehensive 
income/(loss) for the year

 – 

7,176

 – 

1,078

(88)

8,166

(102)

8,064

Total comprehensive 

income/(loss) for the year

 – 

 7,176 

 – 

 1,078 

 24,223   32,477 

(6,564)

 25,913 

Transfer of revaluation 
reserve

 – 

(169)

 – 

 – 

169

 – 

 – 

 – 

Change in investments in 
joint operations

 – 

 – 

 – 

 – 

100

100

100

200

Provision for dividends 
payable to the State Budget 
(Notes 13 and 15)

 – 

 – 

 – 

 – 

(13,264)

(13,264)

 –  (13,264)

Profit share payable to the 
State Budget and dividends 
declared (Note 13)

 – 

 – 

 – 

 – 

(1,021)

(1,021)

 – 

(1,021)

Balance at 

31 December 2016 

(as restated, Note 3)

164,607 437,510

29,700

3,164 (178,214) 456,767

(1,177) 455,590

Profit/(loss) for the year

 – 

 – 

 – 

 – 

39,644

39,644

(195)

39,449

Other comprehensive 
income/(loss) for the year

 –  (26,032)

 – 

298

(213)

(25,947)

911

(25,036)

Total comprehensive 

income/(loss) for the year

 –  (26,032)

 – 

298

39,431

13,697

716

14,413

Transfer of revaluation 
reserve

 – 

(217)

 – 

 – 

217

 – 

 – 

 – 

Change in investments in 
joint operations

 – 

 – 

 – 

 – 

7

7

7

14

Provision for dividends 
payable to the State Budget 
(Notes 13 and 15)

 – 

 – 

 – 

 – 

(29,498)

(29,498)

 –  (29,498)

Registration of shares 
(Note 13)

29,700

 –  (29,700)

 – 

 – 

 – 

 – 

 – 

Balance at 

31 December 2017

194,307 411,261  – 

3,462

(168,057) 440,973 (454)

440,519

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