Lithuania to Amend its Tough Hydrocarbons Legislations

In what is already seen by some experts as a bait for Chevron, the Lithuanian Government is poised radically to amend its shale gas and hydrocarbons taxation which, notably, if passed, would fix tax “ceiling” for shale gas output.

Chevron pulled out from Lithuania mid-September and cited the Baltic country’s ever-toughening hydrocarbons legislation as the main reason for the departure.

If the Lithuanian lawmakers approve all the suggested amendments, among other things, total shale extraction production, not output in separate shale boreholes - as now - would be taxed.

Once the new gas taxation bill is passed by the Parliament, the Lithuanian Environment Ministry that has initiated the amendments intends to announce a new shale gas exploration and extraction competition.

“The Ministry has proposed several versions of the amendments. Importantly, with their adoption, shale and traditional hydrocarbons taxes in relation to production volume would rise proportionally slower than its current state. However, the budget would see more revenues from the taxes,” Valentinas Mazuronis, the Environment Minister, told Natural Gas Europe.

The Government Strategic Committee, he said, has supported the proposal of taxing a shale gas extraction company’s total output volume, not its separate boreholes.

“If to look now at separate bores, depending on the extracted quantity in each of them, extraction tax is in a range from 2 to 20 percent. The Strategic Committee agreed that this has to be changed,” the minister said.

According to Mazuronis, Ministry officials will seek the involvment of strategic shale gas and hydrocarbons investors in the amendments’ deliberations.

“By the new shale tax system we want to find the best compromise between the investors and authorities. Our ultimate goal is to create for all investors a favorable environment that would attract them to Lithuania. On the other hand, oil or gas is our national property and it is understandable we want to get a maximum benefit from it,” the minister underscored.

The amendments aren't expected to be prepared until mid-February. If passed in Parliament, the Ministry will take on the preparation procedures for a repeated shale gas exploration and extraction competition.