Interview with Duncan Nightingale, Chairman of the Supervisory Board of Ukrnafta, to Interfax-Ukraine

Author: Dmytro Koshovyi

Discussion around the supervisory boards’ activities in state-owned enterprises has never been as active as it was at the end of 2025. The rationale for their establishment and the involvement of foreign members, their independence and effectiveness, the level of remuneration, and the accountability of their members were discussed. These debates culminated in mid-November with the Cabinet of Ministers of Ukraine approving an action plan to renew the composition of supervisory boards and executive bodies at several energy companies.

Interfax-Ukraine gain insight into how the supervisory board at one of Ukraine’s fuel-and-energy-sector companies operates and spoke with Duncan Nightingale, Chairman of the Supervisory Board of Ukrnafta, about the results of nearly two-years work and plans for the current year.

— Could you describe how the Supervisory Board of Ukrnafta is currently structured and operates? How often and where does it meet? How is interaction with the Management Board organised? How deeply is the Supervisory Board involved in strategic and key management decisions?

The Supervisory Board of Ukrnafta consists of five members. Three of them are independent, including myself as a Chair. The remaining two members represent the shareholders, the State (through the Ministry of Defence of Ukraine), and Naftogaz of Ukraine.

The purpose of our Supervisory Board is to act as the primary oversight and control body, guided by the best business practices, including OECD principles of corporate governance and transparency.

I believe, the Supervisory Board of Ukrnafta serves as a strong example of effective corporate governance implementation, where independent directors and shareholder representatives adhere to the highest standards of transparency and accountability. This enables Ukrnafta’s management to remain fully accountable for its decisions and performance within clearly defined parameters.

I need to state unequivocally: Ukrnafta has a professional Supervisory Board composed of experts from diverse fields with a broad range of competencies. Our primary focus is to enhance the Company’s operational efficiency and long-term performance. We hold formal Supervisory Board meetings at least once a month. However, we remain highly flexible in our approach.

In practice, we frequently convene weekly meetings, as we continuously review and approve projects and procedures. We approve financial, investment, and strategic development plans. This systematic and in-depth work, involving detailed analysis and strategic direction-setting, demonstrates the tangible contribution of the Supervisory Board to the Company’s development.

With respect to contractor selection and procurement under major contracts, the Company ensures that all procedures are organised and conducted in full compliance with legislation, state requirements, and internal policies. The Supervisory Board makes decisions exclusively based on comprehensive, properly prepared information, considering the results of legal, financial, and compliance reviews. This approach ensures an appropriate supervision level, sound decision-making, and effective control, without interfering in operational management.

Furthermore, the Supervisory Board has established dedicated committees, including the Audit Committee and the Nomination and Remuneration Committee, which meet regularly.

Overall, we are deeply engaged in all oversight functions and maintain intensive interaction with the executive body, including through ad hoc and additional meetings to discuss investment projects based on detailed presentations. At the same time, we do not engage in micromanagement nor assume the role of the executive body. Its responsibility is to manage day-to-day operations and ensure the company’s profitability.

— Ukrainian media continue to report that Ukrnafta is seeking to recover advance payments made for services that were never delivered under the previous management.

This is another very sensitive matter. It relates to the period before 2022, particularly 2013–2022, when the representatives of certain minority shareholders effectively managed Company. I will choose my words carefully, but that period was marked by extremely poor governance, not only financially but also from a corporate governance perspective. Rules and regulations were treated as a formality, and the best business practices were largely absent.

I believe what existed at the time was a system of self-serving practices.  Funds were withdrawn from the Company, while the Company itself was left in a very poor financial position.

I joined the Supervisory Board in March 2024, almost a year and a half after the decision of the Supreme Commander-in-Chief’s Staff to transfer all shares not owned by Naftogaz into state ownership. By that time, significant improvements had already been made. However, the scale of the work still required was substantial, and the consequences of past neglect remained grave.

The current composition of the Supervisory Board was formed in March 2024, and we have continued the Company’s deep transformation embedding proper corporate governance, restoring financial discipline, and ensuring that every process aligns transparently with OECD best practices.

This was essential to rebuild trust from the government, shareholders, and potential future investors, as well as address the Company’s historic negative reputation.

Over the past two years, we have undergone a profound transformation. Today, Ukrnafta is financially stable and resilient, with well-established corporate governance procedures and decision-making processes that serve as a benchmark for Ukrainian enterprises and are respected both domestically and internationally. This has enabled us to attract substantial investment, including from the European Bank for Reconstruction and Development.

We now have a clear short- and medium-term vision, and we have moved from crisis management to structured planning and predictable investment cycles. Investors respond positively to this transformation.

I am confident that Ukrnafta can serve a reference point for other companies that do not yet have supervisory boards, demonstrating the tangible value a professional supervisory board can bring, particularly, in strengthening corporate governance standards and achieving international credibility. I believe that would be beneficial.

— How important was the transition in 2025 from government approval of financial plans for state-owned enterprises to the approval of a “letter of expectations,” under which the Supervisory Board approves the financial plan directly?

This was an important step. In the case of Ukrnafta, it means that at the highest level the Cabinet of Ministers issues a letter of expectations to Naftogaz, setting out what the parent company must contribute to the State Budget of Ukraine.

Naftogaz then translates those expectations into specific targets for Ukrnafta, the level of contribution to the shareholder through dividend payments to the state budget.

We embed these targets into our operational planning, determining the volumes of oil and gas that must be produced to generate the required profit. We then break this down further, to production levels required at individual fields, the number of wells to be drilled to achieve those volumes, and operational activities necessary to meet Naftogaz’s expectations.

Naturally, this defines the overall cost base, including drilling programmes, maintenance, equipment and associated capital expenditures. The budget is then developed within additional constraints, such as resource prices, expected gas pricing parameters from Naftogaz and the Government, and local content requirements. The Company consolidates estimated revenues and expenditures to determine whether the planned level of capital investment is sustainable.

The Supervisory Board may engage with Naftogaz to substantiate potential adjustments to the expected targets, including the realistic level of investment, available capital, and contribution that can be responsibly ensured. There is, therefore, a period of alignment and refinement of expectations. Ultimately, the Company does everything possible to meet the targets set by the shareholders.

It is, to certain extent, a negotiation process. The shareholder engages constructively with us. They understand our constraints, the need to accumulate capital, missile and drone attacks, damage to facilities and infrastructure. There is a strong mutual understanding, and we work closely to meet the expectations of the State.

In November 2025, the 2026 Financial Plan was approved. However, due to intensified attacks and damage to production facilities at the end of 2025 and early 2026, we need to revise it now. The updated plan is under review.

Timely approval of the financial plan is critical. Best practice, particularly in the petroleum  industry, is to approve the financial plan for the next year before the year begins, given the long procurement and contracting involved.

— How would you assess Ukrnafta’s current financial position, considering Russian attacks on facilities and gas-pricing decisions?

By the end of 2022, over a ten-year period, the Company had accumulated more than UAH 10 billion in consolidated losses and had a significant debt to the state budget. Over the past two years, we have fundamentally reversed that situation. We transformed the Company from a loss-making enterprise into one generating billions in net profit, returned to shareholders, meaning the state budget, in dividends.

Overall, the Company’s current financial position is resilient, particularly, given the wartime conditions and the challenging operational environment. Despite damage caused by missile and drone attacks, the Company is able to maintain relatively high revenue stability and predictability.

Before the end of 2022, when the Company was controlled by certain minority shareholders, drilling activity was almost non-existent, occasional one or two wells per year. The reserve base was declining, and production was falling. Over the past three years, we have drilled more than 40 wells and increased production. Year-on-year growth has been approximately 4% in oil and around 3% in gas, which translates into roughly 3.4% in oil equivalent terms.

Given the wartime environment, turning the Company’s performance from negative to positive is, in my view, an outstanding achievement. It reflects the high quality of the executive team’s work and the extraordinary efforts made to develop the Company.

— A few words about Ukrnafta’s business profile and the balance between downstream and upstream. In recent years, the Company has significantly expanded its fuel retail network.

The Company had operated around 550 filling stations. We subsequently completed a transaction to acquire the Shell-branded network, which added another 118 stations. Today, we operate 663 mono-branded stations, making UKRNAFTA number one in the market by network size.

The next milestone is to reach first place in sales. We are among the top three now. However, ensuring high-quality supply of petrol, diesel and lubricants to the military remains our key priority.

— We discussed the achievements of the Supervisory Board. How would you assess the performance of the Company’s management?

Mid-2025 brought significant changes. Sergii Koretskyi, who served as CEO of Ukrnafta until mid-May 2025, moved to Naftogaz as Chairman of the Management Board. Therefore, we needed to appoint a new CEO.

In July 2025, a new version of the Company’s Articles of Association was approved, transforming the executive body into a collegial Management Board. The CEO now heads the executive body and submits proposals for other Board members. In August, we launched a recruitment process for a new CEO. It was open, transparent, and competitive, in line with the best corporate governance practices.

Through a competitive Prozorro procedure, we selected the recruitment firm Talent Advisors, part of the international Odgers network. The Supervisory Board’s Nomination and Remuneration Committee defined the job profile and candidate requirements. The recruitment firm conducted an initial screening of both internal and external candidates and presented a strong shortlist. They ensured impartiality, transparency, and professional assessment of candidates who met the position requirements and proceeded to interviews.

We ultimately appointed a new CEO – an internal candidate, Bogdan Kukura, who previously served as Production Director and Chief Engineer. He was the strongest candidate, highly respected in the oil and gas sector, an experienced manager, and a professional deeply familiar with all areas of the Company’s operations, competencies that are critical to lead the business.

We then launched the selection process for the remaining Management Board members. As of today, one position still needs to be filled but we have made substantial progress toward completing the full composition.

— How many candidates were considered for the CEO position?

I am not certain of the exact number, but it was approximately 15. The recruitment firm conducted screening and interviews, after which the top five candidates were presented to the Nomination and Remuneration Committee and the Supervisory Board.

— Regarding Ukrnafta’s investment strategy. A year ago in Davos, we discussed the Company’s move into energy generation.

That direction remains fully relevant. The Company aims to become a multi-energy business. Developing our power generation capacity is strategically important in light of the country’s energy needs.

Put simply, we need electricity to power pumps and sustain production. If we take electricity from the national grid, less remains available for consumers. Given ongoing attacks on the energy system, electricity is critically needed for civilian consumption. Therefore, wherever possible, we must generate electricity ourselves.

This can be achieved efficiently through gas-to-power solutions. At times, we have surplus gas; whether to inject it into the system or use part of it for local power generation becomes a matter of balancing.

These generation units are mobile, compact, and more difficult to target than large facilities. Generating our own electricity, we ensure operational stability even during grid outages. This supports continuous production and supply.

There is a defined roadmap for gas-to-power projects. They will progress in line with the 2026 financial plan and will scale depending on available capital.

— So, if I understand correctly, the focus is now on relatively smaller-capacity projects rather than the previously discussed large-scale facilities of several hundred megawatts?

We have identified projects financed both through our own capital and through funding sources such as the EBRD, with a total planned capacity of around 400 MW. Within that figure, there is a range of projects: some small 2–3 MW local gas-to-power units next to our facilities, and some significantly larger CHP projects exceeding 200 MW. The scale ultimately depends on available capital.

— What other projects does Ukrnafta have in its portfolio?

Given the ongoing attacks, generation projects will remain a priority. At the same time, Ukraine is currently importing large volumes of gas from Europe at high prices, which is costly. Therefore, we need to drill more wells and increase domestic production, particularly gas.

The 2026 Financial Plan provides for drilling a significant number of new oil and gas wells. It also includes further modernisation of our filling stations, particularly those rebranded from Shell to Ukrnafta. We have made significant progress, but further investment is required.

We also need to attract additional investors. Modernisation of gas treatment facilities and compressors are essential to improve efficiency. Additionally, there are considerable costs associated with repairing equipment damaged in attacks.

The list of priorities is extensive, while funding is not always sufficient to cover everything. Therefore, this year we will be very active in attracting investors and securing donor financing from international financial institutions.

— You mentioned the approved financial plan, which is currently being revised. Can you outline its key parameters for this year?

It is still too early to give the exact numbers. However, the primary objective is to ensure sufficient oil and gas production to meet our obligations to the Cabinet of Ministers and Naftogaz in terms of contribution to the state budget.

Secondly, we must drill an adequate number of wells and maintain our facilities to secure production and revenue.

In parallel, we need to upgrade and modernise equipment to ensure operational stability.

Equally important are the gas-to-power projects to reduce pressure on the national grid.

These are the core priorities. Ultimately, everything depends on available capital, resource prices, and the revenue we are able to generate.

— Last year, the Cabinet of Ministers announced the tenders for production sharing agreements (PSA) for the Mezhyhirska and Svichanska blocks in the Lviv, Ivano-Frankivsk, and Chernivtsi regions, which ultimately did not result in signed agreements. There were also several auctions for oil and gas licences conducted by the State Service of Geology and Subsoil. How interested is Ukrnafta in participating in similar tenders and auctions in the future?

These discussions are currently taking place at the level of the government and shareholders. It would be premature to comment in any detail at this stage.

— During the full-scale war, what has been the most difficult decision for the Supervisory Board — and why?

The Supervisory Board constantly faces difficult decisions. Some of them have a direct impact on Ukraine’s energy needs, which in turn directly affect people — electricity, heating, and so forth.

We receive signals and guidance from the state that may influence our investment plans. At times, we must quickly reprioritise investment directions and adjust project portfolios to accommodate such requests.

In wartime conditions, this is particularly challenging, and determining priorities is not straightforward. We must respond rapidly — increasing production, repairing equipment, addressing urgent needs that were not originally budgeted in the Company’s financial plan. This may require shifting or cancelling other projects to reallocate capital.

At the same time, we must preserve proper corporate governance and transparent procurement and contracting procedures. We have seen what can happen in the absence of effective supervision, including corruption scandals in other companies. Therefore, the core challenge is striking the right balance between speed of response and maintaining transparency and control.

— Last year in Davos, then First Deputy Prime Minister Yuliia Svyrydenko spoke about the possibility of privatising 25% of Ukrnafta. This year, Economy Minister Oleksii Sobolev reiterated the idea. What is your view on this? Is the Supervisory Board preparing for partial privatisation?

The Supervisory Board has not been presented with a formal plan or strategy in this regard. Therefore, any comment at this stage would be speculative.

— Many Ukrainian companies are expanding internationally to enhance resilience. Is Ukrnafta considering such a move now, or only after the war?

I attend many international conferences, including in Davos, and other forums where international banks and investors are present. I consistently inform investors about the opportunities, scale, and types of investment available in Ukrainian companies, including Ukrnafta.

Clearly, war remains the primary constraint. Conditions have not improved. Actually, in recent months they have worsened. As a result, attracting international companies, for example, oilfield service providers, to establish a physical presence and execute projects in Ukraine remains extremely challenging.

At the same time, awareness is growing that Ukraine offers substantial investment opportunities. Companies with a higher risk appetite are currently assessing opportunities, positioning themselves and studying the regulatory and contractual environment. At this stage, it is largely about positioning, as risks for private business remain high.

Private equity funds, and particularly international financial institutions, demonstrate a somewhat higher risk appetite. They are prepared to invest into dedicated foundations, through which projects can be financed.

If and when there is a credible prospect of a peace agreement or sustained peace, this will effectively open the floodgates for investment. I do not believe that is an exaggeration. The scale and quality of assets and investment opportunities in Ukraine are significant.

For now, the key priority is investor education, a constructive and positive narrative, and preserving relationships, so that when the right moment comes, investors are ready to enter the country.