Shale is About Energy Geopolitics and Lithuania Needs to be Part of It

Lithuania's Minister of Environment, Valentinas Mazuronis, is the country's staunchest supporter of shale exploration in the Government and regrets Chevron had to drop ts bid due to the massive process changing and a stiffening of shale legislation.  Chevron had the first-ever tender to explore and extract shale gas.

Eyeing a repeat tender, the minister says conditions will have to be “way more flexible.” But the mounting task the Government faces is changing the adverse attitudes the Lithuanian population has towards hydrocarbons, Mazuronis admitted to Natural Gas Europe

There’s a notion had the Government split the first-ever shale tender into two separate parts, for exploration and mining, the endeavor would have gotten off the ground by now.

Well, that idea has always been very popular. But I want to remind that yet in 2008 we had passed our Geology Law that, among other things, foresees issuing licenses for use of our earth’s depths. And though the Law lays out a possibility of unbundling the two- exploration and mining- into two separate tenders, the-then legislators’ passed law emphasized the necessity of having these works carried out by a single bidder.

Obviously, the lawmakers, both then and now, are well aware it would be effectively impossible to attract a serious investor if we did not allow them to take on both.

No investor on earth will put its money into something without a guarantee of an investment payback.

Sure, there are many Lithuanian lawmakers who insist Lithuania itself should take on explorations of its hydrocarbons.

But, unfortunately, we do not have the technical capacities to do that on our own. So it means at the end we’d have to announce tender for that. Sure, having exhausted much time for the deliberations and resources for numerous feasibility and research studies.

According to calculations, as much as 60-80 mn  Litas ($24-32 mn USD) would be spent for the exploratory works alone.

I really doubt whether Lithuania, with an annual budget slightly above $10 bn USD (of which an impressive  $3.5 bn USD is the EU financial support- Natural Gas Europe) can take on its shoulders such a financial burden.

Certainly, a global investor like Chevron is the best option for us for the financial and technical capacities it has.

Do you reckon there have been any flaws with the first tender? What are they?

I really could not name any major mistakes, but obviously the Government lost the battle in the front of forming a public opinion about shale and its benefits.

Frankly, exploration opponents have succeeded in getting on their side a solid support from the various layers of Lithuanian society.

But in fact, we really do not know how much of the population is in favor of the bid, or against it, as there has never been a reliable poll conducted.

From the windows of my office I’d see only a couple dozen of people clamoring against shale exploration in the country. Sure, they do not represent the nation.

Secondly, for the lack of information on the resources, I also tell off former Conservative-Liberal government that having taken on the endeavor has done too little addressing the public’s concerns.

Local municipalities that have not explained the local communities the benefits of shale gas locally are also to blame.

Unfortunately, even some Government members throughout the process started doubting about shale use, perhaps giving in to the clamor surrounding it.

I remain a staunch supporter of shale exploration and will always be one despite being called names.

As the Environment Ministry has announced a repeat tender for shale exploration and mining in Lithuania, do you believe that some of the requirements for bidders to-be should be more flexible?

Well, indeed, the conditions for bidders in the first tender I reckon were too stringent, laid out having in mind Chevron, a global energy player.

That fact that we, in a sense, in advance favored the American company, at the end of day played against it.

If we had set out simpler tender conditions, we would have had certainly more bidders.

I believe that many of my peer lawmakers, nearly non-stop talking about Chevron, succumbed to what I call  the complex of grandiosity, forgetting that we, frankly, are a miniscule shale market t for it, compared to the hydrocarbons  deal Chevron has landed in Ukraine.

I’m not in the shoes to comment on how, or should, the requirement for a repeat tender can be relaxed, but I believe there could be simpler demands when it comes to new bidders’ experience, investment scope and obligations, etc.

For example, I couldn’t grasp why the experience of a bidder in shale exploration had to be 20 year or over. What about if it matched all the other criteria but the experience is 15 years?

This kind of discrepancies should be rid off.

Despite the setback with Chevron I remain optimistic that a repeat tender can produce a serious investor in our shale resources.

When do you expect a repeat tender to take place?

We are not going to rush it. That’s first. As we have submitted the Government certain changes to the shale-related taxation, aimed to alleviate it, we look forward to hearing on the proposals.

There seems to be necessary to align part of the Lithuanian shale legislation with the EU regulatory basis.

Obviously, we’ll have to a lot better to do the explaining to our people in rural communities, where exploration is planned.

This is perhaps a job of the utmost importance. I’ve had many heated argues with municipality mayors over the issue of shale.

And as a matter of fact, I’d always ask them when arguing what they did to stave off local people from leaving abroad. I’ve never heard from the mayors a solid answer, only demands for the Government.

If it is necessary, I’ll visit the communities myself, explaining what kind of a positive transformation they can see with an investment in the shale.

Do adverse decisions on shale gas exploration, such as those in France and some other countries, could dampen Lithuanian shale prospects?

I don’t think so. Look at the multi-million shale deal Chevron has signed with Ukraine. I’ve spoken to ministerial-level representatives from the UK and the Brits’ expectations from hydrocarbons are also very high.

Despite some temporary setbacks, my Polish counterpart has reiterated to me Poland is to gear up the shale works. He told me shale exploration and mining in a course of 5 years will be carried out in 40 different sites. And most importantly for us, the works have support of 60-70 percent of the population. Over a year in shale mining, the Poles have had no shale-extraction-related case of water contamination. This is impressive and something we can learn from.  But sure, there is a variety of opinions and policies on shale.

I am really getting tired of hearing all those talks that shale gas exploration and extraction, known as fracking, will do only damage and no good at all for Lithuania. There must be something wrong with the Lithuanian mentality that we get so panicky when there’s a talk of a major investor’s plans in Lithuania.

The sad fact is that over 20 years we are enjoying our state’s independence we’ve done practically until now very little in reducing our energy dependence on the single faucet from Gazprom.

Taking into account that shale thing is part of the enormous issue of energy geopolitics I am not surprised at the wide range of decisions. I am hoping we will make a smart one- explore our hydrocarbons and benefit from that.