Oil Potential Likely To Elude Gas Sector
BMI View: The size of Tethys' oil discovery in the Raisiniai licence area has yet to be confirmed, but it promises more oil potential in Lithuania's Baltic Basin. This could be unearthed from both conventional and unconventional resources in the country. Technological advancement and supportive prices may bring players back to Soviet-era conventional wells, while the lure of Lithuania's potentially sizeable shale oil resources could also support good long-term production outlook. However, current studies and estimates suggest that this does not extend to gas, which would leave the country heavily reliant on gas imports in the foreseeable future.
Tethys Oil 's latest oil discovery may raise Lithuania's hopes of decreasing its dependence on energy imports. The Swedish company confirmed the presence of oil after drilling the onshore Lapgiriai-1 well in its Raiseiniai licence. It also managed to flow 'small amounts of oil' during production testing. Managing director Magnus Nordin is 'very pleased' with the result as it 'confirm[s] the presence of an active petroleum system' on the licence. Lapgiriai-1 is adjacent to a Soviet-era well, which had oil shows when drilled in the 1980s but never developed.
Oil was found after vertical drilling in the limestone formation lying within the Raiseiniai. The firm will now carry out an 80 square kilometre (sq km)-wide 3D seismic survey around Lapgiriai-1 well to identify oil-bearing fracture systems. The Raiseniai licence is held by Tethys (26%), Odin Energi (24%) and LL Investicos (50%).
Soviet Relics Revived
The size of this discovery has not been determined, but it could spur interest in re-entering wells that had been abandoned in former states of the USSR. Technological advancements, coupled with supportive oil and gas prices, have seen independent players take the risk to re-examine previously- explored areas. For example, Canada-listed Transeuro Energy is looking to develop three gas fields that were deemed not to be commercially viable during the Soviet-era in the Crimean Peninsula, Ukraine. Australian firm Advance Energy also took up the previously-abandoned Ortyntska gas field in Ukraine, hoping that technical issues that were initially encountered could now be overcome ( see 'Advancing Into Conventional Opportunities', June 12 2012 ).
Tethys was most likely eyeing the same riches when it entered Lithuania in 2012 by buying into the interest of Lithuanian firms Minijos Nafta and LL Investicos. Minijos Nafta had shares in the producing Gargzdai licence, while Investicos had rights to Raiseniai and Rietavas, which had known oil deposits. These licences lie within the Baltic Basin, which Tethys saw as 'geologically highly interesting'. Activities are also supported by 'attractive fiscal terms', according to director Nordin at the time of the farm-in.
Shale Hopes Also Abound
Interestingly, the Silurian/Ordovician shale formation could occur in all of these licences. While Tethys has yet to tap Raiseiniai's shale potential, it has been more active in the oil-producing Gargzdai licence. In August 2012, it announced that it had completed a work programme on the Skomantai-1 well, which was partly drilled to test for the hydrocarbon potential of the shale section that lies on top of the primary sandstone target.
The lack of updates on Gargzdai suggests that more work is to be done to draw a definitive conclusion on its shale potential, though this will not be the last that will be heard of shale exploration within Tethys' three licences. The purchase of US supermajor Chevron of a 50% stake in LL Investicos, reportedly for its possible shale resources, could also see further updates on efforts to test Raiseiniai and Rietavas for possible shale oil or gas.
For energy import-dependent Lithuania, any oil and gas finds could go a long way in bolstering its energy security. According to latest available data from Eurostats, Lithuania's total inland energy consumption may have fallen between 2002 and 2011, but oil and gas consumption remained broadly unchanged. The shut-down of its nuclear plant in 2010 has only made the country more dependent on gas and electricity imports to meet the country's power needs.
|Fossil Fuels Remain Dominant|
|Change In % Share In Lithuania's Energy Consumption Mix (LHC) & Energy Consumption ('000 tonnes of oil equivalent, RHC), 2002-2011|
Although conventional exploration successes such as Tethys' find at Raiseiniai are encouraging, it could be its shale resources that would make a more material impact on the country's long-term energy security. According to the latest June 2013 EIA study of technically recoverable shale oil and gas in selected countries, Lithuania's recoverable shale oil potential is estimated at 300mn barrels (bbl) - 25 times that of its proven oil reserves as of January 1 2013. This raises hopes that in the longer term, its oil import dependence may fall.
Still, current EIA estimates suggest that its shale resources would not be able to alleviate its dependence on Gazprom to meet its gas needs. The same survey highlighted that while Lithuania could have 112bn cubic metres (bcm) of risked gas-in-place in the Baltic Basin - the only basin studied for Lithuania - , none of these are thought to be technically recoverable. In the short- to medium-term, the country will most likely continue to be heavily reliant on gas imports, even if it seeks to increase the share of renewable energy in its energy mix.
|More Oil Than Gas|
|Lithuania Oil Production & Consumption (LHC, '000b/d) And Gas Production (RHC, bcm)|