Lithuanian PM: “Lithuania Welcomes Shale Production Bidders”

The topic of hydrocarbons along with meat exports and security enhancements were among the top three questions on Lithuania’s Prime Minister Algirdas Butkevicius’ US visit agenda last week, which included a meeting with US Vice-president Joe Biden.

“Just by putting the issue of shale resources on top of the agenda the Lithuanian government head has sent out a clear message across the Atlantic: Lithuania started to really taking the issue seriously… Events in Ukraine and Russia have definitely shaped the new approach. As of now, no major US shale gas driller became interested in a repeated Lithuanian shale gas exploration and drilling tender, as far as I’m aware,” said Kestutis Girnius, a prominent US-born Lithuanian political analyst to Natural Gas Europe.

The Lithuanian PM has started off the US visit through first-hand hydrocarbon experience at the Marcellus shale deposit in Pennsylvania, one of the largest of its kind in the United States. The Prime Minister also met with representatives of Pittsburgh University.

“I hope that the meeting with you as experts in this field and the extensive US experience in exploring, mining and using shale gas resources will provide us with useful information and give a new impetus to the efforts to use the energy resources,” said Butkevicius.

He emphasized that Lithuania has drawn up a favorable new shale legislation package and is gearing up to announce a repeated shale gas exploration and extraction tender thought to take place as early as mid-2015.

If the Seimas (Lithuanian Parliament) endorses the Government’s proposals, shale gas production should be taxed 1% during the first three years, instead of applying the previously proposed rate of zero tax.

But the planned new tender has not attracted investors’ interest so far, acknowledges Lithuanian Environment Minister Kestutis Treciokas.

“There are no calls or inquiries for that kind of information, so I dare say there is no much interest (in the planned tender),” noted Minister Treciokas.

In late 2013 Lithuania had already carried out its firs shale gas exploration and extraction tender, but Chevron, the winner, withdrew its bid for a shale gas exploration license, citing numerous changes in fiscal, legislative and regulatory climate as the reason.

Prior to the Lithuanian PM’s US visit a Chevron Communications Official in Eastern Europe issued statement saying that the US energy giant was no longer interested in Lithuania as the opportunities it could potentially provide “could no longer compete with the other opportunities in Chevron’s global portfolio.”

Butkevicius downplayed the Chevron statement, saying that with one company gone, others are likely to step in.

Lithuania’s shale gas reserves are estimated to be from 100 billion to 200 billion cubic meters, but Lithuanian Geological Survey director has said that underneath Lithuanian soil there might be shale oil, and not shale gas.

At Pittsburg University, the Lithuanian Government head reiterated he was hoping that the Lithuanian Parliament will support the Government proposals to reduce the tax tariff on shale gas extraction to 1% for the first year of operations.

Reportedly, at the White House, US vice-president Joe Biden welcomed Lithuania’s plans to build a LNG terminal which could be potentially stocked with the US natural gas in the future.

“The Vice President was very optimistic about the LNG terminal. It was obvious that he has comprehensive information and almost knows the terminal’s capabilities very well… We will have all the opportunities to hold direct negotiations with the companies that already have licenses,” said the PM to Lithuanian media.

Currently Lithuania’s gas reliance on Russia’s Gazprom is 100%, but with the LNG facility’s launch next year the country will start also using gas from Norway’s Statoil.

The case in Lithuania of unconventional energy resources exploration has been increasingly re-assessed amid the Russian embargo, aftermath of the standoff between Russia and the West.

According to political analyst Girnius, it has underscored Lithuania’s vulnerability and served as “an eye-opener” to some Lithuanian lawmakers who previously bristled against hydrocarbons.

“It turned out at the end of the day that amid the security uncertainties Lithuania has neither the shale project, nor the nuclear power plant project in its hands. I think unconventional energy resources opponents will be having a harder time now in getting the public’s support against shale exploration and mining in the country. I believe that Butkevicius himself finally understood the Chevron pullout has been bad for Lithuania’s security and now is more resolved than ever to get a repeated hydrocarbons exploration and drilling tender going, hoping some serious global players will line up  for the bid” the analyst told.

Vytautas Gapsys, Deputy Chairman of the Lithuanian parliament and an influential high-ranking official in the ruling Labor Party, told Natural Gas Europe that the future of shale in the country is hinged on the Government, not the Parliament.

“It was the Government who disagreed with Chevron back in 2013. The ruling Social Democrats themselves were very divisive on the issue then. But with the push for the bid from their leader (Butkevicius) now the shale hopes look better now. That the Government has changed its position shows the new shale regulation that awaits parliamentary approval now. Still, the questions regarding the environmental impact need to be answered to all, the Labor Party also, though we in general support the hydrocarbons bid,” said Gapsys.

Pranas Zeimys, a Conservative lawmaker, insisted the Parliament has been leaning to voting for the draft shale resources bill.

“The Conservatives have expressed their support for the bid in 2013 and will do so now,” he told Natural Gas Europe, but couldn’t say when the bill reaches the parliament floor.

Citing the US visit, the former Lithuanian Environment minister, now euro-parliamentarian Valentinas Mazuronis also welcomed the Lithuanian PM’s shale efforts in the US.

“I believe we all miss the information what exactly it was said on the issue, and how Lithuania was introduced and how it was explained that Lithuania last year effectively drove out from the country the largest US investor it could think of. Back then, the entire thing lacked very much support of the Government. And if it now has turned up it is very welcoming, though there should be some unease if it (support) is not too late…It will take more than a single visit to the US to restore the reputation,” Mazuronis told Natural Gas Europe.

He says he sees no possibility to get Chevron back into the country, but the new tender shouldn’t be all about that, the European legislator insisted.

According to Mazuronis, “Its comeback would be very desirable, but the whole thing cannot be pegged on one company regardless of its potential. There’re more possible investors which I’d like to see bidding (in a repeated tender).”.

He added the EU member states can decide on their own in regards to developing unconventional energy resources.

"I believe the same position will remain in the future," he said.