Lithuania: The Aftermath of Chevron's Pullout
What is one’s bitter disappointment is another’s sheer joy, and little between.
Chevron’s decision to retreat from a tender for a license to explore hydrocarbon resources in Lithuania’s 1800 square kilometer Silute-Taurage prospect has triggered a flurry of as much acrimonious as joyful emotions in the Baltic country.
But fears the pullout could considerably damage the country’s striving for energy independent and security and reputation largely prevail. To address them, Lithuania’s Prime Minister Algirdas Butkevicius has hurried to suggest that his country “might” consider a revision of the laws regulating shale gas exploration in the country.
“It is worth taking a fresh look at the shale legislation with an eye to preparing and eventually announcing a new tender,” Butkevicius said in a radio interview this week after Chevron, citing some politicians’ “malicious activities” to derail the Chevron plans and “unstable political environment” in the country, has decided to back out from the tender.
“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,” Chevron said in a letter to the Government head and the Environment Minister.
With various guesses mounting “what else” compelled the American giant to scrap the shale has exploration plans in southwestern Lithuania, perhaps the Environment Ministry chancellor’s reasoning is worth more attention. The official claimed Chevron had sought to “considerably” improve the conditions of tender it won.
“The Lithuanian negotiators could not agree with that,” Robertas Klovas, the ministry chancellor, did not elaborate.
The Chevron retreat has sent ripples through the Lithuanian political landscape and beyond, with the country’s some leaders warning of hard fallout from the pullout.
“I really don’t see any major foreign investor knocking at the door of Lithuania for quite some time after Lithuania has blown up a nearly a whopping $800 million USD in investment. That is how much Lithuania, to my calculation, will lose after the pullout,” Remigijus Zemaitaitis, an influential MP from the ruling Tvarka ir Teisingumas (Order and Justice) Party, told Natural Gas Europe.
“This is scandalous: the country’s image has been tainted and the investment hopes dashed. The always-wavering Government must assume responsibility for that,” echoed Eligijus Masiulis, a MP and chairman and the opposition Liberalsajudis (Liberal Movement) Party.
He says the Liberals suggest two options for the Government.
“First, hurriedly seek a renewal of the communication with Chevron, admitting some mistakes on our side and try to sit down with the company for a round of negotiations to get Chevron back. If this does not work, then we urge to organize a new tender with clear-cut terms and conditions as soon as possible,” Masiulis told Natural Gas Europe.
He told he had already spoken about that to the Lithuanian Prime Minister, Algirdas Butkevicius, but “has not heard anything promising from him”, apart hearing that the PM would set a Working group to discuss a new tender.
Blaming the Government leader for the fiasco, he said the opposition could see very clearly the lack of coordination in its action, as well as and the Lithuanian Parliament majority’s.
“It was seen from the very beginning. The environment minister endorsed the accession of Chevron, while other Social Democratic ministers attempted to block it by passing chaotic changes to the legal, fiscal and regulatory environment,” the Liberals leader told.
In his words, Lithuania has appeared to be “an uncivilized state” and sent a very bad signal to potential investors. But his fears now are that the Government’s inaction will lead to scrapping the Visaginas Nuclear Power Plant project, other strategic energy project.
“I see a lot of similarities when it comes to amending and toughening the nuclear plant-related legislation. Besides, even the Government resolves to take on the project, I doubt whether it will be able to muster the Social Democratic support in the Parliament,” Masiulis said.
Juozas Olekas, an influential Social Democrat, dismissed a possibility of trying getting Chevron back to the negotiations table.
“C’mon, do they (liberals) really think we’d consider doing that? We’ve exerted lots of efforts in keeping Chevron in Lithuania, and if you were to take a look at the voting on the hydrocarbons exploration-related legislation in the Parliament, you’d find out that MPs from all the political parties voted against the legislature. In fact, I believe the former Conservative Government is largely to be blamed for the pullout, as it in power has not done anything to address the hostile public opinion against shale resources exploration and the insufficient preparation for it of state institutions,” Olekas told Natural Gas Europe.
Blaming the Government leader for the fiasco, he said the opposition could see very clearly the lack of coordination in its action, as well as and the Lithuanian Parliament majority’s.
Kestutis Masiulis, a Conservative lawmaker, also insisted he wouldn’t be surprised to see other two Lithuania’s crucial energy projects- construction of Hitachi-led Visaginas Nuclear Power Plant and Klaipeda Liquefied Natural Gas Terminal- to be thwarted in the near future.
“Gazprom has already been joyful seeing Chevron leave. Now it is its turn to take on Lithuania’s other two vital energy projects to hold Lithuania in the Gazprom reigns,” the namesake of Liberal Eligijus Masiulis told Natural Gas Europe.
In the light of Russia’s ongoing economic war against Lithuania which has already seen import ban of Lithuanian dairy products to Russia and hundreds of Lithuanian trucks stuck for weeks at the border for Russian customs inspections, the fears of Russia’s malevolence against the current EU Council Presidency host, Lithuania, are increasingly high in the Baltic state.
On a lighter note, now some politicians and analysts half-jokingly note that if a foreign food mart or a furniture manufacturer had decided to step onto Lithuanian soil, the task for an investor would have been simple, as no one would even think for that sort of investor to pass a few dozen additional legislative acts and attune them with the people’s will.
Sure, with hydrocarbons exploration is a whole lot more at stake.
“I do not want to be an ominous harbinger, but Japan’s Hitachi Ltd may follow into the Americans’ footsteps because of the same reasons. The only difference I see the Japanese’s patience is tougher, therefore they are waiting here longer,” Gitanas Nauseda, a prominent analyst predicted.
He says Lithuania “got lost” between the thirst to find out the factual scope of hydrocarbon resources and the demands for the investor.
“The theoretical estimations of shale gas and oil shale resources throughout Europe do not promise any major miraculous discoveries in Lithuanian soil. Perhaps it holds some insignificant reservoirs. But the bottom line is we’ve lost an excellent opportunity to find out how much exactly of the resources we have beneath, and what exactly we have down there. What about if nothing is there? If we knew that for sure, we’d calm down. Now we will be uneasy for long with the question mark in the air. And let us leave alone the blow to the image of Lithuania as a country for investment. Sadly, we messed it up where it matters most for us- in the field of energy independence and security,” Nauseda emphasized.
Lithuanian opposition leader Andrius Kubilius, whose government is credited for attracting Chevron to Lithuania, slagged off the Social Democratic Government for the “costly inactivity and impassiveness.”
In his opinion, the current administration has caused departure of “a modern investment that could change Lithuania and guarantee its energy security.”
The Conservatives’ leader said Chevron’s pullout is “a triumph” of the only gas supplier to Lithuania; i.e. Russian Gazprom Holding.
Meanwhile, Lithuanian President Dalia Grybauskaite weighed in, stating: “We should become concerned that our last actions with regard to the hydrocarbons legislation have significantly changed the legal environment for investor. Therefore we have the withdrawal.”
She however stopped short of blaming the Social Democrats and their leader.
“Now I wouldn’t like to blame anyone or do some finger-pointing, bet the fact itself is saddening. Obviously, there will be a pause in the endeavor of energy security. Sure, the riches of our soil’s depth will not go away because of this, but in a sense, the striving is partly put off into the future. Alas, one of the strategic projects that would have been very important in seeking energy independence in the country has complicated,” the President told.
And, ironically, with Chevron gone, there have been apparently a major shift in the public opinion on the company and its bid in Lithuania.
Lithuanians, majority of whom just a couple days ago bristled against just mentioning the name of Chevron has embraced it at a whopping 60 percent when asked by the trendy website Delfi.lt whether the Chevron pullout is a blow to Lithuanian economy and the country’s image.
The retreat most likely won’t deal an imminent blow to the foundation of the Government, but even some of the vociferous anti-Chevronists admit its reputation and Lithuania’s has been shaken.
“I praise Chevron for the decision, but I see it as a result of the joint efforts of the communities and politicians who have come in defense of national interests. The Government will have now to deal with lots of accusations, sometimes utterly unfounded, for months to come, and give out explanations about our investment environment, but defense of national interests outweigh that,” said Algirdas Salamakinas, a MP.
He pointed out to the example of Poland, where a large foreign shale gas exploration company had also retreated, and for the bid a Polish company in which the state holds a 75 pc stake was established.
“We ought to follow the Poles’ example,” the Social Democrat suggested.
But Nauseda, the analyst, confronted him: “Let’s soberly assess whether we, with the experience and technological abilities and capacities we have, would be able to do what Chevron could do. Do we have that much money? And let’s stop raving we can build our own nuclear plant if Hitachi leaves.”
And there are a few anti-shale exploration-minded politicians, who even with Chevron gone, suspect the company plays tricks.
“It all looks tricky to me. I’d not surprised if the company has chosen the “Plan B” in order to work its way into Lithuania through the existing Chevron-related companies,” Linas Balsys, a parliamentarian, chairman of the Green Party and also one of the most vociferous Chevron foes, speculated.
Asked what the “Plan B” is, he replied Chevron could try to pursue the bid through the Lithuanian capital companies LL Investicijos and Minijos Nafta that had been granted shale gas and oil shale exploration and mining rights yet in 2009.
“Our party’s ultimate goal now is to repel the companies’ licenses for that kind of activity,” he told Natural Gas Europe.
Meanwhile, in the Taurage-Silute region, the issue of shale gas seems to have sown enmity among the villagers for long.
“At the end, the factor of the record-high price of land due to Chevron’s anticipated arrival had kicked in and namely it was swaying many villagers in favor of the Americans,” a villager from Zygaiciai, the epicenter of shale gas exploration resistance, told.
After Chevron was granted the contract in mid-September, the price of agricultural land in the region has soared from 3 thousand litas ($1.2 thousand) to a whopping 20 thousand litas (over $8 thousand), and a dozen villagers has stricken it rich.
“Now those who suddenly got richer sneer at the activists who left without nothing and who now raise the question of “what could have been if Chevron had come.” Many of them now agree that life in the village would have changed. And not necessarily for worse,” the villager who spoke on the condition of anonymity told Natural Gas Europe.