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Wednesday 21.03.2018 | Name days: Una, Unigunde, Dzelme, Benedikts

Economic Diary. Let there be oil!

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Аuthor: PantherMedia/SCANPIXThis is something unbelievable, but Latvia could become an oil-producing country. The current perspectives remain foggy and unclear, but the fact remains – Balin Energy has begun drilling oil wells near the coast of Kurzeme.

Arab sheiks in Latvia

The company hopes to compile data regarding oil exploration in Latvia’s economic zone in the Baltic Sea by Q3 of 2013. The current depth of the drilled oil well is over 500 m – one-third of the planned 1 500 m. After finishing the oil well, Balin Energy will proceed with data analysis. According to representatives of the company, the usual success rate when searching for oil deposits is 25%.

Latvia’s PM Valdis Dombrovskis visited the floating drilling platform Ocean Nomad this week. An official visit by the head of the country’s government confirms the strategic worth of the project, says Chairman of the Polish PKN Orlen Jacek Krawiec, who is also a co-owner of Balin Energy along with Kuwait Energy.

The recent meeting between representatives of the company and Latvia’s President Andris Berzins had plenty of compliments exchanged between the two sides, as were hopes to strengthen and develop economic cooperation. Businessmen were very interested in Latvia’s investment protection capabilities, banking sector and chemical industry.

It is planned that the total volume of investments in exploration efforts in Latvia’s exclusive economic zone will reach nearly 26.8 million LVL.

Terminal of strife

It also became known recently that the gas terminal in Incukalns, which was shown by President Berzins to President Gribauskaite not too long ago, will become the main component of the Klaipeda regional LNG terminal.

The creation of this complex has become a tiresome challenge for all involved countries. First, Latvia, Lithuania and Estonia are unable to decide who is the best candidate to construct the terminal. In November, 2012, European Commission’s hired consultant Booz & Company pointed toward Finland as the best candidate. Up until then, Finland stayed out of the discussion, but then expressed interest in receiving a big complex with ample funding from the EU.

But Tallinn and Helsinki failed to come to an agreement.

Nevertheless, Brussels’ position on European aid has undergone an unexpected transformation. Up until now it was assumed that the money will be given to the project that will ensure gas supply diversification for the entire region or at least its major part. Lithuanians decided to act instead of wait. The Lithuanian government has announced its intention to construct an LNG terminal on its own, without help from EU funds or neighbours.

Meanwhile, Litgas, a daughter company of Klaipeda nafta, has announced its intention to employ the services of Latvia’s Incukalns terminal in 2015.

Another ultimatum

Continuing the industrial topic it is worth mentioning the turn of events at Latvia’s largest industrial plant Liepājas metalurgs. Its largest shareholders have been presented with yet another ultimatum for the past month. They are once again offered to sell their shares to creditors for 1 LVL. The new offer, however, also contains an alternative: investments worth 10 million LVL form each of them. If the request is not completed until May 31, 2013, insolvency proceedings will be initiated against LM.

During a closed meeting of the Cabinet of Ministers that took place this week, the situation at Liepaja’s largest industrial plant was discussed yet again. The situation continues to deteriorate. Because of the lack of funds, the plant had only three work days this month. The total amount of financial obligations reached 125 million LVL in the middle of May.

Combating tax avoiders

One more event that falls outside of Latvia’s borders relates to the approval of the bill about Latvia’s joining of the International Convention on Mutual Assistance in Tax Matters. The Latvia’s government had approved this bill this week.

It is planned to have Latvia sign the bill on the upcoming meeting of the Council of Ministers of the Organization for Economic Cooperation and Development (May 29-30 in Paris). Joining the convention is an obligation for those wishing to join the rich countries club. There are currently 43 countries that are part of this pact.

The convention reflects the recently arisen tendency of going from bilateral tax agreements to multilateral ones.

This agreement mainly covers the exchange of information (not just following a request, but automatic exchange as well) about taxpayers (legal persons and individuals). This applies to all forms of mandatory state payments, aside from tax duties. Furthermore, the convention provides for the carrying out of multilateral fiscal inspections and international aid in tax collection, including aid for approval of measures on the territory of a country that is part of the pact.


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