KIEV, Oct. 19 - Vanco Energy Company, a U.S.-based oil firm, on Thursday hit new snags in Ukraine's Black Sea offshore oil and gas project after the government had rejected the company's Production Sharing Agreement (PSA).

This is the second time the PSA has been rejected over the past two months, a sign the project may be facing political opposition following the change of the government in August.

"We have to agree that a new PSA must be drafted," the government's resolution said.

The government argued it was not happy with Vanco's PSA and had been seeking to increase the share of oil and gas that will be owned by Ukraine.

Vanco, which won a tender in April to explore for crude oil offshore the Black Sea near Kerch, had suggested in the PSA that Ukraine would own 20% of the extracted oil until investments are returned, and 40% afterwards.

Continued on page 2