Second Tender on Lithuanian Hydrocarbons Exploration Likely in Early 2014

The Lithuanian Environment Ministry has decided today that a repeat tender on the country’s hydrocarbons exploration and mining will be needed in the country after the US oil giant Chevron, citing significant regulatory and legislative changes, quit its shale gas exploration bid it was granted by the Lithuanian Government in mid September.

Besides, importantly, the Lithuanian authorities have come to a conclusion to considerably change the terms of tender in order to attract more companies to take part in the bidding.

The Ministry, however, has not set a date for launching a second tender yet, but emphasized that first “a thorough legal analysis” of the previous tender procedures will be done.

“We have come up with a decision of having a repeated tender, but only the condition that before it all legal tax changes will be thoroughly taken into consideration,”  Daiva Matoniene, deputy Environment minister and head of the Commission in charge of hydrocarbons exploration, told reporters after the meeting.

Asked how long the evaluation can last, she responded it could take “up to several months.”

 “The ruling of the Commission is just a formal stride as after the withdrawal of Chevron there is no a possibility to pursue the competition,” the official noted.

 She added that at the moment no companies were showing interest in exploring the resources in Lithuania.

Chevron was the only bidder for the 1,800 square km Silute-Taurage prospect in south-western Lithuania.

But Chevron apparently got fed up with the Lithuanian lawmakers’ prolonged indecisiveness and the shaping resolution to tax exploration of shale gas and shale oil at a whopping 40 percent, up from the current 16 percent.

Wary of that, Chevron asked Lithuania to “freeze” its hydrocarbons-related legislation and taxation for 7-10 years, which the Lithuanian Government refused to do.

The revelation was made by Environment Minister Valentinas Mazuronis, who has been a staunch supporter of having hydrocarbons explored by Chevron in Lithuania.

Alongside with the legal analysis, the Lithuanian authorities are set to work on the terms of the tender, lowering the requirements and thus allowing more companies to take part in the bidding.

“I want to emphasize that we are not talking of a new tender, but of a repeated one after Chevron, the winner of the previous tender, backed out. We have come to the conclusion that the terms of the first tender had been too uptight and stringent, hence the authorities are poised to diminish the requirements of experience and some of other criteria,” Jonas Satkunas, director of Lithuania’s Geological Service, told Natural Gas Europe.

He pointed out that some of terms, like the requirement of an extensive experience in the field, could have not be met by any Lithuanian hydrocarbons company, or even a company from the neighboring countries.

“All bidders previously were required, for example, to have enormous experience in hydraulic fracturing, which is something that only major global names can boast of,” he noted.

First, he said, the Environment ministry’s hydrocarbons Commission comprising of representatives of Environment, Economy and Energy Ministries, will work out conditions for a new competition.

“As the authorities are not considering changing the Commission and there seems to be accord in it on all major issues, I believe the process will be smooth and will not take long. Especially, that there are no requirements of having a new EIA done,” Satkunas told.

The repeated tender could be announced in the first quarter of 2014, he added.

Meanwhile, Minister Mazuronis has said he is “encouraged” by the Commission’s determination to lower the tender requirements.

“Once its terms are modified, it will attract more bidders. It is a good thing. I’d like to see four or five companies bidding,” the minister told Natural Gas Europe.

The minister had planned meeting Chevron Exploration & Production Europe head Derek Magness this week, but the meeting announced last week, was called off after the Chevron representative did not turn up in Lithuania.

According to the minister, Magness was on the list of an American businessmen delegation that visited Vilnius last Monday.

Mazuronis said he had not been informed about the reasons of his absence in it.

“If he comes to Lithuania another time, I’ll definitely be interested in meeting him as I’m willing to meet all possible investors, especially as big as the American company,” the minister noted.