Lithuania passes 'hydrocarbons-friendly' legislation

The Lithuanian Parliament has passed “shale-friendly” amendments to the hydrocarbons legislation, which now, notably, courts municipalities, where hydrocarbons exploration and mining is planned. The new law redaction foresees 10% of hydrocarbons resources tax collected from would-be miners to be channeled to the coffers of the municipalities. It is estimated that local authorities can expect as much as USD $1 million from the enactment of the law provision.

Public opinion is more “shale-friendly”

Of that amount, half has to be legislatively allotted for the preparation of the municipality’s territorial planning documentation and implementation, as well as public building construction and upgrade, also for installation of public and recreational space. The remainder must go for the financing of the municipalities’ special environment protection support programs.

“Certainly, this is god news and a big step forward in meeting the municipalities’ needs. The previous law had excluded local municipalities from the process,” Silverijus Statkus, deputy mayor of the Taurage Municipality in southwestern Lithuania told Natural Gas Europe.

After the municipality’s Zygaiciai community bristled against Chevron, the US energy giant shortly left the Baltic State in early October, 2013.

The deputy mayor said local communities have become "friendlier“ to the shale gas bid since the Chevron pullout.

"But with the legislature still 'hot', it is advisable that the legislators came to the region and spoke to the people about the changes. As a state, we‘ve spent a lot of resources and much times in explaining the peculiarities of the adoption of the euro since 2015, but there should definitely be more exertion in talking more actively about the amended shale legislation,”  Statkus said.

New winner selection criteria

According to the law on Hydrocarbon Resources Tax, hydrocarbon resources will be taxed 1% in the first three years, but not longer than until the start of 2020. After the three years, conventional hydrocarbons (oil and gas) will be subject to a 12-percent tax rate and a 15-percent tax will be applied for dispersed hydrocarbons.

Importantly, the main criterion in picking up winner in future tenders since 2015 will be the sum of single investment payment as well as the largest investment amount, not exceptionally the former as it was until now.

The amended legislation goes into effect starting January 1, 2015.

“The ministry is obviously pleased with the adoption of the hydrocarbons law amendments. The so-called hydrocarbons commission at the Ministry will sit down as soon as next week, I hope, and before the end of the year at latest. It will discuss the course of actions necessary to announce a repeated tender for hydrocarbons exploration and extraction in the country. I believe the date could be announced in the first quarter of 2015“, Daiva Matoniene, deputy Environment minister, told Natural Gas Europe.

She, however, refrained from saying when the competition can take place.

“Definitely, in 2015,” she said.

Environment Ministry’s proposal on EIA

After being granted Lithuania’s first shale gas exploration and mining tender to pursue the bid, Chevron pulled out shortly from it in early October 2013 citing inconsistencies in the regulatory environment.

The American company’s departure submerged the Lithuanian Government in an avalanche of criticism, with the former Environment minister, now a member of the European Parliament Valentinas Mazuronis, a staunch ally of the shale bid, being one of the most vociferous critics.

Now it seems, however, that the Ministry of Environment is set to further ease hydrocarbon explorers’ regulatory environment – relieve them from the now effective requirement to obtain environment impact assessment before taking on the bid.

It would be, however, applied only for dispersed hydrocarbon exploration bids when hydraulic fracturing is used and also for natural gas extraction bids for less than 500,000 cubic meters of gas.

The Ministry of Environment has already lodged in with the Government a legislative proposal on that.

Lithuanian soil likely contains a lot more shale oil

Meanwhile, the Lithuanian Geological Service (LGS) keeps insisting that Lithuanian soil contains “most likely” around 70% of oil shale and the rest is shale gas.

“This is what our tentative drilling has shown. But media has not made the distinction and talks only about shale gas underneath,” Jonas Satkunas, the LGS director, told Natural Gas Europe.

But if the findings prove to be ubiquitous, they come in favor of the country.

“Shale gas transportation would require expensive gas mains, as for shale oil, conventional oil trucks do the job,” noted the director.

If the state had enough financial resources, it would be for its interest to map out the layings of its soil.

“But Lithuania cannot affors the costs- a single 3-kilometer drill costs around EUR15 million ($US 18.5million).  Thence, the state’s concerns over would-be hydrocarbons investor which will be entrusted to do the job and hence the states’s resolve to control the process,” he said.