Lithuania offers tax incentives to attract shale gas investors

Lithuanian flag on a table
Source: DollarPhotoClub

Lithuanian shale gas will not be taxed for the first 3 to 4 years of exploration – the Lithuanian government’s strategic committee announced.

Lithuania is keen to capitalise on the country’s shale deposits to ease it’s almost hundred percent dependence on Russian natural gas. This is why the Environment Ministry has been tasked with creating legislative structure that will attract foreign investments.

The country’s Environment Ministry is currently working on a taxation scheme under which shale gas production would be exempted from tax during the initial three or four years and then would be subject to a 15 percent tax rate. In this, Lithuania follows the lead of Poland, which recently proposed a Tax Bill under which shale gas exploration will be tax-free until the year 2020.

The government’s strategic committee has also altered the tax levied on conventional oil – from a tax rate that ranges from 2 to 20 percent, depending on the amount of oil extracted, to a flat 12 percent rate.

Despite these promising developments, it is not yet clear when a new tender for shale gas exploration rights will be announced. Environment Minister Valentinas Mazuronis explained that “technically, we would be ready [to launch the tender] quite soon, but […] we have to do our homework if we want not only to announce it, but also to have a real result after it, that is, an investor. Starting with preparing the general public. Work with potential investors. After this has been done, we can announce it. I cannot say when this will happen”.

Shale gas exploration has so far been met with a lot of ‘grass root’ opposition in Lithuania. In response to these concerns, the country’s parliament tightened the rules governing shale gas production. It has also discussed a proposed tax rate of 40% on shale gas activities – a move which allegedly contributed to Chevron – so far the only major player interested in Lithuanian shale – pulling out of the country last October.

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