Oil exploration tender process to begin

  • 2000-11-30
  • Nick Coleman
RIGA - The Latvian government announced last week that it will invite tenders next April for long-awaited offshore oil exploration licenses on a 2,675-square-kilometer tract of its Baltic Sea waters.

The tract will be divided into seven parcels and lies well north of the proposed Latvia-Lithuania sea border, a point of disagreement between the two countries that has scared off oil companies in the past.

Industry estimates have put the possible volume of Latvia's offshore reserves, though not commercially proven, at 250 million barrels. But a senior government geologist cautioned that previous estimates are inaccurate, saying that only drilling will establish the real quantity. Meanwhile oil exploration further to the south is being delayed by Latvia's failure to ratify a new sea border treaty with Lithuania.

The oil tender process is being publicized at a major oil industry conference in London between Nov. 28 and Nov. 30.

The government made the announcement now to meet with Latvian law, which requires that notice be given to the public and environmental groups.

Offshore drilling in Latvia, to the west and south of Liepaja, broke off with the collapse of the Soviet Union. The drilling results, and the results of geological tests suggest there are "prospects," according to Maris Seglins, deputy director of Latvia's State Geological Survey, who added that there is still much uncertainty.

"Latvia isn't going to become Texas," said Seglins.

"Offshore surveys conducted in 1995 were not based on direct data. Only drilling will produce real data. Companies will have to carry out their own exploration, which will take between two and five years."

The Cabinet of Ministers has established guidelines for the creation of a national oil company from which the state would get a share of offshore production.

Oil drilling to the south has been held up by delays in the Latvian Parliament over ratification of a sea border treaty with Lithuania. Latvian MPs, fearing Latvia may be sidelined by Lithuania's more advanced oil industry, have expressed concern that Latvia should receive a share of revenue generated by extraction of oil from possible reserves straddling the border.

But the dispute led BP Amoco, which along with Swedish OPAB received an exploration license in the mid 1990s on a parcel abutting the proposed border, to abandon oil exploration plans there.

Latvian fishing groups have been lobbying Parliament, saying the proposed border gives Lithuania territory which was Latvia's prior to the Soviet era. They have threatened to blockade ports if Latvia ratifies the treaty. While the treaty has been approved by Latvia's foreign affairs committee, opposition to ratification has come from MPs in Latvia's Way party, which is central to the governing coalition, says Guntars Krasts, head of the foreign affairs committee and an MP from the For Fatherland and Freedom Party.

Maris Riekstins, who heads the border agreement's Latvian negotiating team, says MPs should go ahead with ratification. He says the treaty provides for negotiations to take place between the countries if one decides to begin oil exploration without the other.

"The Foreign Ministry has repeated that this agreement is important for good neighborly relations," said Riekstins.

"The agreement reached with Lithuania in 1999 is a compromise. Negotiations have been long and complicated, involving eight Latvian governments since 1993. Neither side has got the ideal solution, which is difficult to achieve in the real world. The idea of two companies cooperating on oil extraction is not unheard of. Sweden has such agreements with both Denmark and Finland."

Latvia and Lithuania have already reached agreement on a fishing permit system which enables the two countries' fleets to operate in each other's waters, and on pooling of the two countries' fishing quotas, says Riekstins. Once the two countries join the European Union, fishing boats from other EU countries will be able to operate freely in the territory anyway, he says.

In comments to the press, Lithuania's new Prime Minister Rolandas Paksas has expressed frustration at the hold-ups.

"We're expecting the Latvian Parliament to ratify the treaty as soon as possible," said Petras Zapolskis, press spokesman at the Lithuanian Ministry of Foreign Affairs.

"I don't know why agreement on fishing rights has been so closely connected to the border agreement. These are two separate questions to be solved separately."