Chevron to Abandon Lithuanian Shale Gas Development

Chevron Corp. has notified today the Lithuanian government of backing out from the tender on exploration of hydrocarbon resources, the government’s press service said in a release Tuesday evening.

Chevron Exploration and Production Lietuva was the sole applicant in a tender for a license to explore for shale oil and gas in the 1,800 square kilometre Silute-Taurage prospect, which Lithuanian experts had estimated might hold up to 80 billion cubic metres (bcm) of technically recoverable shale gas.

“On Tuesday Chevron representatives visited the Government and announced that the company was withdrawing its bid to explore hydrocarbon resources, but it would stay in Lithuania to carry on with its previous activities. Chevron Lithuania CEO Gilbert Ankenbauer has informed me that the decision followed the unfinished legislative base for hydrocarbon exploration in Lithuania,” Prime Minister Algirdas Butkevičius said in the press release.

In a letter to the PM and the Environment minister, Valentinas Mazuronis, Chevron blamed some unidentified politicians’ “malicious activities” to derail its shale development plans.

However, some energy analysts hastened to conclude the local communities’ big resistance against the plans has also played its role.

In the press release, the Lithuanian PM noted the American company’s participation in the tender corresponded to all the conditions of the competition and the-then legislative and regulatory environment. However, during the time, he noted, over 25 other important legislative pieces on shale gas exploration bid has been passed, or are still on the way.

“We regret such a choice of the company. However, we understand it is entitled to the right, as Seimas (Lithuanian Parliament) is still deliberating a number of various legislative acts that will affect the use of hydrocarbon resources in Lithuania. We hope that Chevron will not refuse to participate in our projects in the future,” the Lithuanian Government head said.

As of Tuesday evening, the government’s communications department could not tell whether a new competition for shale gas exploration and extraction will be held.

In the letter to the Prime Minister and the Environment minister, Chevron has also hinted the “currently unstable political environment” in Lithuanian has also triggered its decision.

“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,” the Chevron letter said.

In the documents obtained by some Lithuanian media, Chevron purportedly had informed the Lithuanian Government of some “dissatisfactory political decisions” yet in the beginning of May.

In the May 8 letter, Chevron said it did not intend to question the lawmakers’ right to regulate exploration and extraction of Lithuania’s hydrocarbon resources, but rebuked that “far from all politicians were friendly towards the Americans.”

It was only last month that the government had officially confirmed that it would proceed with the granting of rights to Chevron Corp. Officials said at that time the government planned to formalize Chevron's win later in September, with the exploration contract to be signed by the end of this year.

The government had previously postponed the decision after public protests by local communities, who fear the chemicals used in hydraulic fracturing could pollute underground waters.  Butkevicius has said thet shale gas exploration could be started only when the local communities approve of it. 

In winer the tender, the multinational had committed to spending a minimum of 80 million litas ($31 million) in exploration on the 1,800 square kilometre field located in western Lithuania near the Baltic Sea in exchange for a seven-year permit. Chevron would also be granted a ten years license to explore for conventional oil in the field.

Chevron said it will stay in Lithuania and focus on its 50 percent holding in Lithuania-registered oil company LL Investicijos, which holds a licence to prospect for oil and gas at the 2,400 square km Rietavas field which is neighbouring to Silute-Taurage.

The Americans’ withdrawal has induced a slew of emotions, from congratulatory greetings to fears the decision will substantially undermine Lithuania’s investment environment.

“I think it is a great decision and, upon a possibility, I will light up a candle at church just to make sure Chevron leaves. Therefore we have changed the laws to make sure Chevron does not harm us,” commented Algimantas Salamakinas, a prominent Social Democrat.

Ex-Economy minister Dainius Kreivys feared the Americans’ pullout can undermine Lithuania’s investment environment and harm the country’s image internationally.

Another Social Democrat, Birute Vesaite, pondered Chevron may have come to the decision having received the preliminary findings the Lithuanian soils contains oil shale, but not shale gas.

“And, sure, the Parliament has put a too tight muzzle on the nose,” Vesaite noted.

Remigijus Zemaitaitis, chairman of the Parliament’s Economy Committee, told Natural  Gas Europe that now Chevron may focus on investing in Ukraine.

“I believe the investment return there is better than in Lithuania,” he told. He did not repudiate a thought Chevron might come back in a couple years after they come up to a conclusion the investment in Lithuania will pay off.

Vaclovas Miskinis, a representative of Lithuania’s Energy Institute, said he could “only guess” what has led to the decision to withdraw.

“The local communities’ big resistance has also played a role alongside the other unfavorable conditions,” Miskinis reckoned.

 
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