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Hydrocarbon Exploration and

Production Opportunities in
Lithuania

Dr. Jurga Lazauskiene, Lithuanian Geological Survey


Dovydas Ragulis, Ministry of Environment of Lithuania
Lithuania

Facts and figures

Population 2.9 million

Labour Pool 1.5 million

Capital Vilnius

Official language Lithuanian

Dominant foreign English, Polish,


languages Russian, German
Real GDP growth 3.0% (2015)
2.9% (2014)
3.3% (2013)
3.8% (2012)
6.1% (2011)

1 11
For ease of

#
For GDP/Capita starting
growth in EU3 # business5

#15
Freest economy
in the world4

* Forecast (European Commission) Source 4: Heritage Foundation, Economic Freedom Index, 2015
Source 1: Statistics Lithuania, 2015 Source 5: W orld Bank Doing Business Report, 2015
Source 1: Statistics Lithuania, 2014
Source 3: Eurostat, 2004-2013
Lithuania

Investments protection and guarantees

Member of the European Union


since 2004

Member of NATO since 2004

In 2015 Lithuania became the


19th Eurozone member state and
converted its currency to Euro
Lithuania’s qualities
Fast to connect infrastructure – logistics

1st in the CEE for quality of roads1 4

Road & Rail:


 25,800 truck fleet in Lithuania in comparison with Germany:
308,078, Denmark: 21,038, Sweden: 15,2482

 Rail cargo services direct to Russia, Belarus, Latvia, Poland,


Germany, Ukraine and Asia (incl. China)

Air:
 4 International Airports, access to major European cities
and Moscow within 2-3 hours flight

Sea:
 Klaipeda State ice-free Seaport

 14.5 m deep port, handling up to 60 million tons of cargo


annually, the largest port in the Baltic States3

Source 1: World Economic Forum, Global Competitiveness Report, 2014 Source 4: Girteka Logistics, 2014. Estimates based on two-driver
Source 2: European commission, 2012 shared shift model
Source 3: www.portofklaipeda.lt
Lithuania’s qualities
Business friendly environment – tax free zones

7 Free Economic Zones (FEZ):


 0% corporate tax for the first 6 years*

 50% discount on corporate tax over the next 10


years*

 0% tax on dividends*

 0% tax on real estate*

Industrial Parks (IP)

6-12 months delivery of build-to-suit


manufacturing facilities

* Conditions apply
Lithuania’s qualities
Infrastructure – logistics

 Well developed network of oil


products refineries and
storages;

 Orlen Lietuva (Mažeikiai


refinery) with a capacity of 15
mln.t of crude oil/year

 Oil products reloading and


storing terminals in the port of
Klaipėda and Vilnius with more
than 10 mln. t./year reloading
capacities

 Gas transmission system


crosses the most perspective
areas for shale oil and gas
production
Lithuania’s qualities
Cost & quality combined

AVERAGE MONTHLY GROSS WAGES (EUR), 20131


5.288
5.251

Position Average Monthly Gross


x8.2
4.596

Salary2, EUR
more than
Lithuania Production 870
3.538
3.529

Technologist
3.449

x5.3 Technical 1,010


2.702

Supervision Engineer
Project Manager 1,160
1.598

x2.5
1.048

Technical Director 1,740


967
949
924
824
777
716
646
507

x1 413

Source 1: National Statistics Departments, 2013


Source 2: Alliance for Recruitment, 2014
Lithuania’s qualities
Business friendly environment

LT LV PL DE SE

Corporate 0 - 15% 15% 19% < 33% 22%


profit tax

VAT 21% 21% 23% 19% 25%

Dividends 0-15% 0% 0-19% 0-25% 0-30%

Personal 15% 24% < 32% < 45% < 57%


income
tax

Social 9% 10.5% Total Total 7%


security 35% ~40%
tax employee
employee employee
< 31.42%
30.98% 23.59%
employer employer employer

Source 1: Ministry of Finance of the Republic of Lithuania


Source 2: Sorainen Tax Card 2014
Lithuania
Business friendly regulatory environment

Unconventional
Tax for conventional hydrocarbons – 1% for first
hydrocarbons – 12% three years (until 2020), after
– 15%

SEIA procedures finished. Service companies for


Environmental studies (EIA) hydrocarbon exploration
and approvals required for and production available
exploration and production locally

Source 1: Ministry of Finance of the Republic of Lithuania


Hydrocarbon Licensing
Hydrocarbon Licensing Tender
• Underground Law of the Republic of Lithuania
• Inventory of the regulations of the granting Hydrocarbon
Production Licenses

• Granting of Hydrocarbon Production License only in Tender procedure (based


on the EU Hydrocarbons Directive) initiated by applicant or by Concession
authority.

• 1 License – Hydrocarbon Production License that permits the License holder


to produce hydrocarbons and also to carry out prospecting and (or) exploration
activities in the License block.

• 9 Hydrocarbon production (prospecting and (or) exploration) Licenses only for


onshore blocks are already granted for 7 companies in previous decades.

• Holders of already granted Licenses have the exceptional right to carry on


prospecting, exploration and production activities of conventional and
unconventional hydrocarbons in the License block.

• Since 2015 Licenses for Conventional, Unconventional Hydrocarbons or both


would be granted. No License is granted specifically for unconventional
hydrocarbons yet.
Regulating authorities in Hydrocarbon Sector in Lithuania

The major regulator - Government of the Republic of Lithuania:


• Takes the decision for granting, suspending and terminating Hydrocarbon E&P Licenses
Policy formation in Hydrocarbon sector/Environmental protection – Ministry of
Environment of the Republic of Lithuania:

Policy implementation; Control and supervision of activities in the Hydrocarbon


sector; organization of Hydrocarbon Tenders - Lithuanian Geological Survey
under the Ministry of Environment
Current status of Hydrocarbon Licensing

 Hydrocarbon Licensing Tender for


Šilutė–Tauragė blocks has been
announced in 2012-06-25, stopped
in 2013.
 The procedures of the Licensing
Tender are foreseen to be
re-opened in fall of 2015.
 Licensing Tender conditions for
Šilutė–Tauragė block included
obligations for shale oil/gas
exploration.

6 companies are granted Hydrocarbon


Production Licenses – rights for E&P
both conventional and unconventional
hydrocarbons: SV Lotos-Geonafta,
JSV Minijos nafta, JSV Manifoldas,
JSV Genčių nafta, JSC
“LL Investicijos”, JSC TanOil;

JCV “Diseta” – License only for E&P of


conventional hydrocarbons.
Production of oil in Lithuania in 1990–2014
Naftos išteklių gavybaLietuvoje 1990 - 2014 m.
Thous.
tūkst. t t.

500

450

400

350

300

250 nafta

200

150

100

50

0 metai
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014
• 5 companies produce conventional oil from 15 onshore oil fields
• 1990-2014 >4,3Mt of oil are produced;
• 2,4Mt of explored recoverable resources remaining.
• Oil production peaked in 2001 (471 thou. t) and decreased in 2014 to 82 thou.t
5% less than in 2013, when 86,07 thou.t of oil was produced.
Geological Setting
Hydrocarbon System and Potential
Geology of Lithuania The territory of Lithuania is a part of Baltic
Sedimentary Basin, located on the SW
margin of East European Craton

The Baltic Sedimentary Basin was initiated


Lazauskiene et al., 2003 during the Latest Vendian-Early Cambrian
and underwent main episode of subsidence
(A) during Silurian-Early Devonian.

o
64
Lazauskiene et al., 2003

NORTH SEA
EAST
EUROPEAN
o
56 CRATON
Baltic Sedimentary Basin
BALTIC SEA
STUDY AREA

Silurian black shales


HERCYNIDES
TTZ - Teisseyre-Tornquist Zone
CDF - Caledonian deformation front
Boundaries of the
Caledonian, Hercynian, Alpine Complexes
ALPINIDES
0 500 km

The regional tectonic framework of the study


area: CDF - Caledonian Deformation Front; TTZ -
Tornquist-Teisseyre Zone
Geology of the Baltic Basin

K
D
K
J S
T O Cm Puura et al., 1999 A B

T S

O
P C
Cm

C D

D
S

Pr
Cm

Zdanaviciute et al. 2012

E-W cross-section through the Baltic Basin (A-A) and Lithuania (A-B)

The sedimentary succession comprise Riphean–Vendian to Quaternary strata.


Sedimentary strata deepen from 1km in the E part of BB; the most complete succession
in SW Lithuania - up to 2,5km, in Poland the thickness exceeds 9km.
Hydrocarbon plays in Lithuania

Formation 2

Shale oil/gas play

Conventional plays:
• Fractured crystalline basement
• Middle Cambrian sandstones
• Late Ordovician carbonates
• Early Silurian carbonates
• Early Devonian sandstones

Unconventional plays:
• Middle Cambrian shales/siltstones?; Formation 1
Zdanaviciute, Lazauskiene, 2004
• Late Ordovician + Early Silurian Zdanaviciute, Lazauskiene, 2004
black shales;
Conventional hydrocarbon plays in Lithuania
Laskovas et.al, 1996

-1375

-800
Telšiai fault zone

-2035

Legend
-900
Oil Filds: Tectonic fault
Girkaliai Depth of top of Lower Silurian
-1600
(in production) (Llandovery)
Šiūpariai
Raseiniai
Raseiniai
(proved reserves) block
block Licensed block
Lapgiriai

Local structures: Main conventional oil fields & prospects


(proved local structures)
are related to the NNE-SSW and W-E
(predicted local structures)
oriented fault zones associating the local
(prognostic local structures) uplifts.
Silurian black shale plays

Svedasai-252
Lebork IG-1
Slupsk IG-1

Taurage-11

Geluva-99

Ledai-243
Vidukle-61
Hel IG-1

Nida-1
TTZ
Pr Ld
W
Pr
W
Ln
Ld

Ld
1 – black graptolite shales, 2 – carb. Claystones

The Llandovery and Wenlock are dominated by


dark coloured, finely laminated, locally
bioturbated graptolitic shales with minor
Ln limestone, siltstone beds
Ld

Ld W

Silurian lithofacies distribution:


3a-b – black graptolite shales

Lithofacies change from shallow


platform carbonates in the E to deep
shelf facies in the SW 5 km
2 km
Lazauskiene et al. 2003
Silurian black Shale plays

The thickness of the Lower Silurian shales in W


Lithuania - 110 m to 160 m.

Red line – presumable boundary of the Early Silurian


perspective shales distribution.

140

130

160
120

130 160
Zdanaviciute & Lazauskiene, 2009 140
150

The depth of the occurrence of the


base of the Silurian in SW Lithuania
2050 – to 1750 m Zdanaviciute & Lazauskiene, 2009
Composition of the organic matter and
ammount of total organic carbon of major shale plays

Zdanaviciute, Lazauskiene, in press

• Source rocks show an excellent organic richness – TOC varies from 0.2–3% – 8-11(19%);

• Pyrolisis yields (S2 = 32–76(100) kg HC/ton rock) suggests a good HC generation potential;

• Organic matter is of „oil-producing" sapropel type II of marine origin and mixed “oil-gas
producing” type II/III; it contain large amount of marine amorphous and algal kerogen;

• Hydrogen indic (100-700 mgHC/gTOC) suggests variable degree of kerogen conversion.


Thermal maturity of the Silurian shales

 Thermal maturity increases


to SW from 0.6–0.7% to
0.9–1,4 %Ro

 Value of 1.94%Ro indicates


the wet gas/condensate
generation zone, related to
the locally increased
paleotemperatures

 Vitrinite reflectance values


indicate early oil to wet
gas/condensate window
maturities - dominant 1.4

liquid hydrocarbons
generation potential.

Lazauskiene, ed., 2014


Assessment of shale oil
and gas resources

Middle Llandovery
„hot shale“

Fjacka+Mossen
shale

Late Ordovician
carbonates

Volume of generated unconventional hydrocarbons for


Late Ordovician – Early Silurian section of 110 m thick:
• prognostic resources of shale oil in place – 3,6–18,3 bill. m3 (area of 1134 - 5691 km2)
• prognostic resources shale gas in place – 1,03–5,13 tril. m3 (area of 1134 - 5691 km2)

The most prospective Late Ordovician – M.-L. Llandovery section of 30 m thick:


• prognostic resources shale oil in place – 1,15–5,75 bill. m3 (area of 1134 - 5691 km2)
• prognostic resources shale gas in place – 0,32–1,61 tril. m3 (area of 1134 - 5691 km2)
Unconventional Hydrocarbon
Resources. Expected volume
of shale oil and gas
Shale oil resources in Lithuania

Energy Information Agency, USA


(2013)

State Commission of members


of Lithuanian Academy of
Sciences, (2013)

Scientists of Lithuanian Academy


of Sciences (Grigelis, ed.) (2014)

Report of Lithuanian Geological


Survey (Lazauskiene ed.) (2014)
Shale gas resources in Lithuania

Zdanavičiūtė, Lazauskienė (2009)

Energy Information Agency, USA


(2011)

Energy Information Agency, USA


(2013)
State Commission of members
of Lithuanian Academy of
Sciences, (2013)

Scientists of Lithuanian Academy


of Sciences (Grigelis, ed.), (2014)

Report of Lithuanian Geological


Survey (Lazauskiene ed.), (2014)
Hydrocarbon Exploration and
Production Opportunities in
Silute-Taurage Block
Hydrocarbon Exploration and Production Opportunities
in Silute-Taurage block

Silute-Taurage block

Šilutė-Tauragė block is located SW Lithuania and in the south borders with


Kaliningrad region (exclave of Russian Federation).

The block covers ~1800 sq. km. (~ 700 sq. miles) area.
State of Exploration of Silute-Taurage Block

Red, purple, yellow and violet lines - 2D seismic profiles by different methods;
red dot – well and the name

In years 1970-1980:
• 222, 2D seismic profiles of 1610 km length;
• 38 oil prospecting & exploration wells;
• several prospects of conventional oil in Cambrian sandstones and Late Ordovician-
Earliest Llandovery detrital limestones;
• Lauksargiai oil field - 150.4 th. t. of conventional oil in-place; 30 th. t. - recoverable
• Rambynas oil play - 378 th. t. conventional oil in-place; 113 th. t. - recoverable
Hydrocarbon Potential of Silute-Taurage Block

• The block is considered to have


perspectives for conventional and
unconventional hydrocarbon resources.

• Conventional oil prospects are likely to


be located within Middle Cambrian
sandstone;

• Unconventional hydrocarbons are


expected in Uppermost Ordovician-
Lower Silurian shale formation
Geological cross-section of Šilutė-Tauragė block
Conventional oil prospects in Silute-Taurage Block

yellow – prospective local structure (prepared for drilling


green – prognostic local structure (undrilled)
orange – drilled local structures
purple contour line – oil field

The depth of the occurrence of the top of Ordovician strata in Šilute-Tauragė block and
the distribution of the local structures potentially perspective for accumulations of the
conventional oil in the Cambrian sandstones
Thermal maturity of the Silurian shales

Šilute–Tauragė block for 110 meters (360 ft.) thick Lower Silurian shale section
–generated shale hydrocarbons in place is 8,3 bill. m3
Development of Hydrocarbon sector

• Conventional and unconventional hydrocarbon exploration and


production is one of Lithuania‘s top priorities in oil and gas sector.

• Lithuanian Government is striving to streamline regulatory environment to


be able to compete for investments in oil and gas explorations.
• The infrastructure (gas transmission, railway, roads networks, oil product
refineries, reloading and storage facilities), is already in place to ease the
logistics chain for shale oil and gas potential development.

• By 2020 Lithuanian gas market will be an integral part of the common EU


gas market which would ensure high level of market liquidity,
competitiveness, energy security and diversification.
THANK YOU FOR YOUR ATTENTION