Lithuania Pursues Most Attractive Shale Gas Legislation
The Lithuanian Government’s Strategic Committee may have significantly bolstered the resolve of potential bidders to participate in the Baltic country’s new shale gas exploration and extraction tender- now set for late May or June- by passing a ruling that shale gas extraction will be tax-free for three or four years since the start of the activity. A modest 15 percent tax will be applied thereafter, Lithuanian Environment Minister Valentinas Mazuronis commented.
“Our Ministry has been told by the Committee to draw up such a legal environment (for the endeavor) that it would work well in attracting potential foreign investors. Such a new taxation system would be similar to that one that Poland is to employ soon…We are still working on the durance of the tax exemption (period). Will it be three or four years depends on the results of the analysis we are carrying out,” the minister told.
The Committee has also insisted on having the conventional gas tax tariff changed- from the current 2-20 percent- it depends now on the volume of oil extraction- to a fixed 12 percent tariff.
Lithuanian Prime Minister Algirdas Butkevicius has already told respective ministries to come up with necessary legislative basis ahead of the planned shale gas tender.
“We’ve have come in the Cabinet to an unanimous agreement to obligate Foreign Affairs, Economy and some other ministries to work out a set of legislative acts- including the laws on Earth Depth, Planned Economy Activity and Oil and Gas Resources- before announcing a new tender. This will be done heeding our neighbor countries’ experience and planned legislative initiatives in that regard,” the Lithuanian PM said.
To placate the public’s unease about the adverse impact of shale gas mining on the environment- a concern that had thwarted Chevron’s shale gas extraction plans in the country- the Government told the Environment Ministry to draw up a well-thought PR plan on informing the public about the activity.
“I really believe that it had been done too little in that regard,” Butkevicius noted.
In addition, Lithuania’s State Geological Service (LSGS) has already drafted and submitted for coordination a number of hydrocarbons regulations: new terms and conditions of the tender, new classification of hydrocarbon resources and draft amendments to the Law on Environmental Impact Assessment of the Proposed Economic Activity.
Chevron, the sole bidder in the previous shale gas procurement, pulled out last October after securing the right, citing adverse tax and legal environment in Lithuania.
The US company’s exasperation was largely over the numerous shale gas legislation changes and especially the Baltic lawmakers’ brewing proposal to tag a 40 percent basic tax on shale gas, which, if adopted, would have been the largest rate worldwide.
Lithuanian lawmakers defended the stringent law, arguing they needed to lay out all safeguards to ensure safety of shale gas mining.
Among other lures for shale gas investors, the Ministry is mulling exempting future investors from a requirement of having environmental assessment impact (ESI) performed before exploratory drills.
“ESIs will be needed only for very deep exploratory drills. This is what the European Commission Directive recommends. This is how it is in all our neighbor countries, which we have to overtake in terms of shale gas investment attraction to have that kind of investors in the country,” the Environment minister underscored.
Though the tender date is slated for May or June, the minister did not elaborate last week on a more precise date.
“The major task ahead is to convince local people that (shale gas) exploration plays in their favor. On the other hand, we have to find out whether we will have serious potential investors, even with the revised shale gas legislation. From the technical standpoint, we are ready to launch the tender pretty soon…” the minister said.