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Lithuania plans to join shale-gas club

Firms will be invited to bid in the first quarter 2012

Lithuania intends to join Europe’s ranks of shale-gas producers. The country plans to launch a tender for shale-exploration rights early next year.

Deividas Matulionis, the chancellor in the prime minister’s office, said firms would be invited to bid in the first quarter 2012 and that they would be allowed to move on to production, if exploration yielded positive results.

Lithuania is hoping to emulate neighbouring Poland by exploiting shale-gas reserves that could provide it with power for several decades. The US Energy Information Administration (EIA) estimated earlier this year that the country could hold 4 trillion cubic feet (cf) of technically recoverable shale-gas reserves. That’s just a fraction of Poland’s estimated 187 trillion cf, but a significant amount for a country of just over 3 million people, almost entirely dependent on costly gas imports from Russia – around 106 billion cf last year.

Lithuania has recently been in talks with the US government and companies over possible shale-gas exploitation. In June, the energy ministry said it had been in talks with a US firm over a possible production deal, but declined to name the company.

The country is also making moves to diversify its energy imports. In May, local energy firm Klaipedos Nafta signed an agreement with the US’ Cheniere Energy, under which Cheniere would supply liquefied natural gas to a Baltic coast import facility with an initial capacity of 1.5 million to 2.2 million tonnes a year.

The move reflects the need to find overseas markets for US shale-gas producing, which is exceeding domestic demand. Earlier this year, the US Department of Energy approved Cheniere’s plans to modify its Sabine Pass import terminal to liquefy gas for export.

A gas pipeline from Poland is also planned, as part of the wider EU network, backed by EU funding. The politics of that project are spiced up by Russian Gazprom’s 37% holding in Lietuvos Dujos, Lithuania’s main gas supplier and key player in the pipeline deal, which may have limited interest in displacing imports from Russia.

In recent months, the European Commission has been looking into potential anti-competitive practices involving Gazprom subsidiaries in a number of EU countries, including Lithuania.

The country has also been under pressure to reform the domestic gas sector to meet EU free-regulations. In October, the government said it had set a deadline of October 2014 to unbundle its gas sector, following talks with German utility E.On Ruhrgas, which holds 38.9% stake in Lietuvos Dujos.

Under the plan, Gazprom, which did not participate in the talks, would be required to give up its ownership of Lithuania’s pipelines within two years. The Russian firm has said it may take legal action if the unbundling goes ahead.

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