Crude oil extraction on indefinite hold

Though he was ready to start this winter, Uldis Pumpurs will probably have to wait another year before pumping the first crude out of Latvian soil.

Theoretically, work on extracting the first ever crude oil in Latvia could begin as soon as the necesarry regulations are approved by the Cabinet.

In practice, however, it could take a year before the first drill sinks in the western district of Kuldiga, as ministries drag their feet on the paperwork and skilled drillers, without whom no crude can be extracted, balk at the project's uncertainty.

Ventspils businessman Uldis Pumpurs announced in January he was ready to start drilling for crude oil on his land in Gudenieki, estimated to contain approximately 700,000 tons of black gold, and was only awaiting the Cabinet to approve the respective regulations.

In an interview with The Baltic Times, Pumpurs said legislation is the biggest roadblock to getting extraction up and running.

In order to begin, three sets of draft regulations, regulating research and extraction, licencing and state tax, have to be approved by the Cabinet.

According to Maija Vimba, head of the Economy Ministry's oil and gas department, the draft regulations were submitted by the Economy Ministry to the Cabinet in December. Since then they have been reviewed by the Cabinet's juridical department and were only awaiting a minor annotation change before they could be approved.

When pressed for a concrete date, Vimba said, "It will happen when it will happen."

For Pumpurs, this means that "the year will go to waste." As Latvia does not have experience in extracting oil, Pumpurs has to collaborate with experts from Russia, Belarusia and Lithuania, which has been extracting small amounts of crude since the late 1980s.

"I have prepared the data, I know who I have to speak with, but I can't invite them to work," said Pumpurs, explaining that the land drillers need to know their schedules a year in advance and would not be able to start work in Gudenieki before completing other projects.

Still, "nothing is standing still, the businessmen are working," Pumpurs said.

Upon receiving a licence, work on Gudenieki's infrastructure development could begin while waiting for the drillers.

Investments of $1 million would be needed to start pumping oil at Gudenieki.

The Economy Ministry's Vimba emphasized that until now dry land in Latvia had not been qualitatively explored, and that upon approving the new regulations other upstream projects could also follow.

And given the sky-high prices for crude on world markets, oil production is extremely lucrative and is no doubt adding to Pumpurs' sense of haste.

However, according to research conducted by Moscow's research and manufacturing amalgamation Specgeophysika in the 1980s, Gudenieki is estimated to be the only noteworthy oil extraction location in Latvia.

But this hasn't deterred Pumpurs, who has has been researching and preparing for crude oil extraction for two-and-a-half years. Samples of Gudenieki crude oil have been tested in Moscow, concluding that it is "good oil," according to Pumpurs.

Still, serious risks remain. "Whoever will begin and execute this work is going to be under a huge risk," Pumpurs said. "It is not a water well. Exploratory work needs to be done," he added.

Pumpurs, an expert in oil transit business, co-owns the companies Puses and Energija UJ, and is a council member at Ventspils Nafta, Latvia's biggest oil terminal.

Pumpurs, who also owns the local Uzavas brewery, created Energija UJ Ltd. together with oil transit businessman Janis Blazevics especially for the Gudenieki oil project.

Gudenieki county owns nearly half of the 100 hectares that sit on top the oil deposits, while the other half has five owners - three private entities, including Pumpurs, and a Danish-founded company, Artis JP.