Lithuanian Minister: “Market day has not come for hydrocarbons yet”

Lithuanian Environment Minister Kestutis Treciokas says a new hydrocarbons exploration and mining tender is under way with competition conditions being readied for March. To address the fact that the date has been subject to multiple changes, Minister Treciokas noted “the new global energy geopolitics” weighs on the Lithuanian bid, but believes a repeated tender will occur in the Baltic country. The Minister kindly agreed to answer a series of questions from Natural Gas Europe.

Your Ministry was planning to lay out the new tender conditions on 01 January, then February and now the date was moved to March. What lies behind the indetermination?

Well, I haven‘t ever personally told that they will be ready for the months you mentioned. What I keep saying that they will be out for everyone‘s review when they are really ready. As of now, the draft is still missing quite a few signatures from certain institutions, like the Lithuanian Ministry of Finance, for example.  When we will have all the governmental bodies‘ approvals, we will put them together and discuss whether the paperwork is right and, importantly, when and how the conditions can be announced.

Your subordinate at the Ministry, Deputy Minister Daiva Matoniene, has told me that the Government’s Political Council, an advisory body on state’s key issues for the Government, will be asked to weigh on them once they are ready. Do you believe the Council’s engagement is necessary in the otherwise ministerial matter?

I don’t think, quite frankly, that there’s a need for that. Asking the Council to have its say on the issue, it seems to me, is as if saying we are lifting the responsibility from the Ministry onto the Council that has comprises lawmakers, not the experts. I don’t think that it is a right thing to do. On the other hand, with the huge importance of the decision, that some seek its involvement is understandable.

Have you spoken to the Lithuanian Prime Minister on the timeline for repeated hydrocarbons exploration and extraction tender and the conditions for it, first?

I did speak to Butkevicius (Lithuanian Social Democratic PM) and he does not like the idea of having the Political Council involved in the decision-making. But, yes, he does want us to work out the new conditions carefully and heeding all the aspects, including the new global energy geopolitics. Look, we have our LNG terminal in Klaipeda which capacity is roughly three-fold bigger than our current needs; we have lots of bio-fuel that has been insufficiently employed. But the bottom line is that with the talks about hydrocarbons exploration and mining we, alas, do not know what lies underneath. There’s much thought to be given on all of that.

Do you personally support the hydrocarbons bid in Lithuania?

If you want to clear my personal take on it, I can say this: yes, I definitely support exploration of our underground energy potential… But here I want to add two things: it (exploration) has to be kicked off when a right time comes for it and, frankly, the time now does not seem to be appropriate. Second, only with data based on the exploration results, a decision on mining should be done. Get me right here, please.  Look, I really do not want the world to start poking fun at us if we announce tender now and no one turns up for it. Well, it is always a possibility it can happen, especially now with the oil and gas prices fluctuating to record-highs. I like the adage that one must show up in the market on the right day - when it is bustling with buyers – not just any day.

Are you saying the market will be bullish in March?

No, I am not saying that, really no. The right time will be when the demand on the market will be back. Then, logically, we will be in a good position to invite over investors and offer them what we can (offer them). When we have two or three of them saying “oh, that is interesting” – I mean the conditions we can propose them –then we will be able to expect some sportive jostling among them before we pick up the winner.

Has there been any interest in the opportunity over the last half-year, with you heading the Ministry?

No, no one has got in touch with me over the matter during the period. The Prime Minister told me he had been approached by one company curious about the possibility. No one can expect, frankly, hydrocarbons investors scrambling amid the changed global energy geopolitics, believe me. Yes, we have Law on Hydrocarbons amended, but it is not enough as investors want more –detailed conditions, but they have to be available during another time, one more friendly for such investment.

Can you provide a rough estimate on how much time it could pass between a new tender announcement and actual mining?

I believe it can take up to one year from the announcement of new tender conditions until the procurement. And another two or three years may pass thereafter until the works start. These things do not happen overnight.

To use your phrase on “a proper market day” do you believe it can ever come to Lithuania? Particularly in light of Chevron’s pullout from Lithuania first, then – Ukraine and Poland lately – amidst changed geopolitics?

I think Chevron’s focusing on Ukraine has not been a right thing, by the way. Chevron is not the only company in the market. As a matter of fact, those few millions of shale gas that we may have in Lithuanian soil is really a small catch for them.  The Americans set eyes on big catches first. Let’s admit: having the American company attracted to Lithuania was part of the political striving to have the Americans here as sort of guarantors of our security.

They came to Lithuania knowing so little of what they might be searching underneath. And as all were talking about shale gas deep there, actually oil shale is what can be found there. But if that turns to be the case, then it will be even better for all of us. The Lithuanian Geology Service estimates the probability of finding oil shale stands at 70 percent.

Do you think it is possible to split hydrocarbons tender in two parts: one for exploration and the other for mining?

I don’t think so. All want the single package. If we split the parts, investors would ask Lithuania reimburse the exploration costs. Personally, I believe it would be a lot better if we could ourselves find out what lies underneath.

There’re speculations your take on the shale bid is heavily weighed down by your party (Treciokas has been a member of the ruling party Tvarka ir Teisingumas (Order and Justice) chairman Rolandas Paksas, who frowns at the idea in Lithuania.

I disagree with you that the chairman is against shale. He just says that is not right time for it now. And I agree with him on that.