Naftogaz ranked seventh in the global governance rating of state-owned enterprises in extractive industries, according to the US-based Natural Resource Governance Institute (NRGI) report published in June 2017.

The rating of state-owned enterprises covers 74 international oil and gas as well as mining companies owned by governments. These companies account for 82% of global oil and 78% of gas production. Naftogaz was highly ranked with 76 points out of 100. This was forth best result among oil and gas SOEs and best among SOEs in Eurasia (according to the rating’s classification).

The researchers emphasized a high quality of the group’s operational and financial reporting. In the same time, they recommended Naftogaz to improve the disclosure on costs associated with performing its public service obligations and mentioned the procurement scandal around so-called “Boyko’s rigs” back in 2010. The researchers also expressed their concerns about possible resignation of the independent supervisory board members because of delays in the corporate governance reform, as this would undermine the international community’s trust in Ukraine’s intention to reform the major state-owned company.

“The high position of Naftogaz is an acknowledgement of our team’s persistent efforts to implement a new corporate governance system compliant with best practices and OECD standards. We hope that the corporate governance and the gas market reforms will continue and enable Ukraine to maximize benefits of its natural resources to the society,” Naftogaz CEO Andriy Kobolyev noted.

The rating of efficient state-owned enterprises in extractive industries is topped by Chilean Codelco (90 points), Indian Oil and Natural Gas Corporation (87 points), Argentinian Yacimientos Petrolнferos Fiscales (83 points) and Norwegian Statoil (80 points). Azeri SOCAR is placed 13th (70 points), KazMunayGas – 25th (63 points), Gazprom – 30th (56 points), Kyrgyzaltyn – 37th (50 points), Uzbekneftegaz – 43rd (41 points) and Turkmengaz – 72nd (10 points).

As a major step to improving the SOE governance, the Institute suggests the governments appoint independent supervisory boards, focusing on clear meritocratic processes and professional experience rather than political loyalty.

Background information:

The governance quality rating of state-owned enterprises in extractive industries is one of 14 components of the Resource Governance Index (RGI), which includes 81 countries around the world. Evaluating countries, the researchers also consider such criteria as open data, taxation, budget planning, licensing, prevention of corruption, rule of law, etc., which constitute a framework for proper governance of natural resources.

Ukraine ranked 44th in the overall rating. The top-rated countries were Norway, Chile and the United Kingdom.

NRGI has been preparing its RGI reports since 2010. Click here for more details on the rating and its evaluation methodology.