07.03.2025 Tenders

Drill pipe procurement schemes: how Ukrgasvydobuvannya manipulates tenders to the detriment of the budget

Ukraine remains deeply dependent on the resources of other countries. We are forced to buy gas, oil products, and electricity on foreign markets due to the lack of our own.

This became possible due to artificial manipulations by the responsible officials of the Ministry of Energy and Naftogaz Group companies. “Ukrenergo, Ukrgazvydobuvannya, and others, who instead of strengthening the energy sector and its full recovery are lining their own pockets.This is evidenced by procurement conducted by the companies and the Ministry of Energy.

One of the few examples is the two procurement procedures for drill pipes announced in October 2024 by Ukrgasvydobuvannya, totaling UAH 426 million. Instead of choosing the most advantageous bidder that offered savings for the state, in each of the tenders, Ukrgasvydobuvannya favored the company with the more expensive offer.

Details of the procurement.

Two bidders competed in the first tender – DP-MASTER MANUFACTURING CO. LTD and MIK LLC. MIK’s offer was UAH 14 million lower than the expected cost, but on December 12, 2024, Ukrgasvydobuvannya rejected it, considering that the documentary requirements were not met.

In the second procurement, the situation repeats itself: MIK’s offer is again UAH 7 million cheaper, but again Ukrgasvydobuvannya rejects it on the same grounds.

Despite the fact that MIK LLC filed a complaint with the Antimonopoly Committee of Ukraine, which recognized the rejection of MIK’s proposals as illegal, the situation has not changed. The customer Ukrgasvydobuvannya was in no hurry to comply with the decision and even began to pull out new “inconsistencies” that it had not previously paid attention to. On January 21, 2025, Ukrgasvydobuvannya discovered new reasons for rejecting MIK’s proposal, but these violations obviously look far-fetched.

Why does Ukrgasvydobuvannya not want to save money?

MIK’s offer included the payment of an anti-dumping duty on Chinese pipes (51.52%), which would have provided additional revenues to the state budget. While DP-MASTER, which was not obliged to pay this duty, had a more expensive offer – almost UAH 20 million more. That is, the state would have lost money that could have been used to restore the country as a result of the procurement through Ukrgasvydobuvannya.

It seems that Ukrgasvydobuvannya is deliberately creating conditions to choose a more expensive supplier, which is clearly not beneficial to the state. The reason is simple: behind the more favorable conditions for the state is MIK, and behind the more expensive ones is a supplier that may be convenient for certain individuals.

Letters from a Chinese manufacturer: “MIK” vs. ”DP-MASTER”

However, the most interesting part begins when we look at the proof of origin of the pipes. “Ukrgazvydobuvannya claims to have received a letter from a Chinese pipe manufacturer, Jiangsu Changbao Precision Steel Tube Co., Ltd. stating that it is unrealistic to produce pipes with a certain “melting”. However, there are two significant problems:

  1. The letter came from a company with the domain cbsteeltube.com, which belongs to a completely different company registered at a different address.
  2. Why did Chinese companies start writing in Ukrainian? Or is this just part of the scheme?

Conclusions

The tenders held by Ukrgasvydobuvannya not only violate the principles of fair competition, but also rob the state. After all, in the case of MIK, the savings would have been obvious – not only because of the lower price, but also because of the duty that would have remained in the Ukrainian budget. At the same time, DP-MASTER, which has no such customs obligations, offers higher prices and does not actually benefit the budget.

This is a classic example of a state-owned enterprise trying to “get” a convenient supplier through non-transparent procedures and manipulations, and jeopardizing fair competition in tenders. All this in the context of the energy and economic crisis that is developing in Ukraine.

We have submitted materials to law enforcement and regulatory authorities. We are waiting for a real reaction, not just formal actions.

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