Chevron returns to Lithuanian shale

Lithuanian flag on a table
Source: DollarPhotoClub

It seems that all is not over for shale exploration in Lithuania. Last week brought the announcement made by the country’s Constitutional Court which ruled that hydraulic fracturing can be legally used for shale gas extraction. This was quickly followed by the news that the American major Chevron will revisit the country’s shale reserves.

On Wednesday, Lithuania’s Constitutional Court decided that the process of hydraulic fracturing – necessary for shale exploration – does not breach the country’s Constitution. The ruling was the result of an application made to the Constitutional Court made in November 2013 made by a group of 34 lawmakers, led by Social Democratic MP Algimantas Salamakinas, chairman of the parliament’s Committee on Environmental Protection. The parliamentary group argued that the use of hydraulic fracturing for shale gas and oil extraction would be harmful to the environment and human health.

On the same day, it became known that a Lithuanian oil and gas exploration company LL Investicijos, whose 50 per cent stake belongs to the USA oil company Chevron, is planning to begin soon exploratory drilling by Stempliai village in the district of Silute.

This will be the first shale well drilled after Chevron bought the stake in LL Investicijos last October and the fist one since The Minister of Energy, Rokas Masiulis, along with the Minister of Environment, Kestutis Treciokas agreed to scrap the planned shale licencing round, blaming difficult market conditions.

Chevron won a tender for exploration in Silute-Taurage in the west of the country in 2012 but pulled out of shale gas extraction in Lithuania in September last year before the final agreement was reached. At the time, Lithuanian parliament adopted proposals for 40 per cent taxation of shale gas production and announced a tightening of environmental regulations.

Chevron’s renewed interest in Lithuanian shale should please Algirdas Butkevicius, Prime Minister of Lithuania, who revealed in an interview in September that he planned to visit the U.S. in order to meet with Chevron representatives. He intended to discuss shale gas exploration and production in Lithuania and inform Chevron officials of the new taxation proposals regarding shale exploration.

A new law was drafted in 2015 proposing a changed base gas extraction tax rate of 12 per cent for conventional hydrocarbons with no differentiation based on extraction site or annual extraction volume. A 15 per cent rate would apply to unconventional hydrocarbon shale. A zero tax rate was proposed for the duration of three years since obtaining the shale licence but no longer than 1 January 2020. Additionally, 90 per cent of the payable tax rate will be transferred to the state budget with the remaining 10 per cent redirected to the relevant local authority where the drilling takes place.

On leaving Lithuania in July 2014, Chevron cited inhospitable fiscal regime as one of the reasons for departure.

According to unconfirmed data, Lithuania could have recoverable shale gas reserves of around 100 billion to 120 billion cubic meters.

Source: Baltic News

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