JKX to suspend 2015 capex programme in Ukraine; shares tumble

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Jan 7 (Reuters) - JKX Oil & Gas Plc (LSE: JKX.L - news) said it would suspend investments in Ukraine and that sales in the country would fall further due to government-imposed restrictions on selling gas to industrial clients and the continuation of high taxes on gas production.

Shares (Dusseldorf: DI6.DU - news) in the company, which gets most of its gas from Ukraine, fell as much as 21 percent on Wednesday on the London Stock Exchange.

JKX said 80 percent of its gas production in the country last month was sold to industrial customers and warned sales could fall to less than half its production capacity if the restrictions remained in force.

Ukraine is facing widespread energy supply shortages after Russia's Gazprom OAO cut gas deliveries to the country for six months last year and separatist fighting in the eastern regions crippled domestic coal supply.

Gazprom resumes supplies last month, but the agreement is valid until the end of the first quarter.

Ukraine imposed rules mandating gas suppliers to divert all output to the population rather than supply to industries and said its gas production tax, which was almost doubled to 55 percent in August, would continue this year.

"The situation cannot exist over a long time because otherwise Ukraine will find itself completely at the mercy of the Russian gas suppliers, and all Russia needs to do is turn the tap off to reduce Ukraine to a complete shivering wreck", a company spokesman said.

Ukraine is further falling out of favour with foreign energy investors, after Chevron Corp dropped a $10 billion shale gas deal.

JKX, which also operates in Russia, Hungary and Slovakia, had cut its 2014 capital expenditure programme for Ukraine in September.

Since then, the company's stock has lost almost three-fourths of its value. They were trading down 9 percent at 11.82 pence at 11:07 GMT on Wednesday. (Reporting By Mamidipudi Soumithri in Bengaluru and Karolin Schaps in London; Editing by Gopakumar Warrier and Savio D'Souza)