Lithuanian Officials to Meet Chevron Representatives Next Week

Lithuanian Environment minister Valentinas Mazuronis has revealed what made Chevron retreat from the shale resources exploration bid in Lithuania: Chevron’s last-minute demand to keep taxes and hydrocarbons-related legislation in the country intact for 7-10 years.

“Speaking about the Chevron withdrawal circumstances, I really would not like one to believe the tax factor was crucial. We should analyze the entirety of factors instead… There had been a very adverse atmosphere for the investor before the decision came. Therefore, in a last-ditch effort to hold the license, Chevron sought to include in the agreement with the Lithuanian Government a provision “freezing”  for 7-10 years all the taxation and environmental legislation…This was not acceptable for us,” Mazuronis told last week.

Chevron’s decision to back out of a tender for a license to explore hydrocarbon resources in Lithuania’s 1800 square kilometer Silute-Taurage prospect has triggered in Lithuania a flurry of emotions and anxiety over the country’s reputation and the deteriorating investment environment.

The revelation, however, did not come as a big surprise to those who had been long warning of the exacerbating regulatory environment for the investor which it emphasized in a letter prior the departure to the Environment minister and the Lithuanian Prime Minister.

“Alongside many other legislative acts, a vast number of new ones have been passed after September 16, 2013, when Chevron was announced the winner of tender. Estimating that from the eyes of a smart investor, it is obvious that the investment and legal regulation environment heavily impacting the economic potential of the Silute-Taurage region, where the works were planned, has effectively changed since the day we were rewarded the tender,” Chevron said in the letter.

Mazuronis said that the Environment Ministry’s commission should announce as early as next week whether to organize a new tender for Lithuania’s shale resources exploration in Lithuania.

“The commission adheres to certain terms and conditions…And those terms and conditions stipulate that such a commission has two options provided there are no bidders: to annul the tender altogether or… If it decides to call for a new tender, I believe it should be some kind of a follow-up to the first one,” the minister said after the meeting of the ruling coalition’s Political council.

“It will be an open tender, sure, nobody is banned from bidding, and, sure, Chevron is welcome to participate in it. Unfortunately, there was just one bidder remaining in the first tender who, alas, decided to pull out. It would be certainly nice if there were more bidders in the first stage,” added Mazuronis who has long been known as a staunch Chevron supporter.

Already this week the minister has announced that he is scheduled to meet Chevron representatives on October 28.

“As far as I know, Chevron’s representatives are coming for three days next week. However, at this point I’m not aware of who is in the delegation, and no topics of the meeting have been decided yet” Mazuronis noted to Natural Gas Europe.

There were speculations in Lithuanian media that Chevron Exploration & Production Europe CEO, Derek Magness, is coming for talks to Lithuania next week.

However, neither the Prime Minister’s spokeswoman Evelina Lazdauskiene nor Orijana Masale, Chevron’s representative in Lithuania have confirmed this.

“I can just inform that the shale resources exploration tender competition commission is to gather in the nearest future and decide on what ought to be done next,” the spokeswoman told Natural Gas Europe.

Amid fears the Chevron departure may ill-affect Lithuanian investment environment and the country’s reputation, Lithuanian Prime Minister Algirdas Butkevicius has been reiterating since the withdrawal negotiations with the Americans should be resumed.

“We had such as case in Lithuania, and I think it would be good for all of us if there were no more of such cases. Speaking about shale gas exploration, each country should know whether it actually has such assets in its territory, or not. I think there were many emotions instead of logic and commonsense. I’d say that the tender should be resumed and continued. I think it would be a signal for investors,” the government head said in a radio interview.

The American company currently owns a 50 per cent stake in LL Investicijos, a Lithuanian oil company that in late September took on drilling a second exploratory well in the Rietavas municipality in southwestern Lithuania, where it holds a license to explore and extract hydrocarbons.