BMI View: Uncertainty stemming from environmental opposition to offshore exploration and disputed maritime boundaries have emerged as threat to the growing interest in Croatia's oil and gas sector. The bearish outlook for reserves highlights the need increased investment to unlock Croatia's purported untapped potential.
|e/f = BMI estimate/forecast. Source: BMI/EIA|
|Crude, NGPL & other liquids prod, '000b/d||15.7||15.3||15.0||14.7||14.4||14.1||13.8|
|Dry natural gas production, bcm||1.7||1.6||1.6||1.6||1.5||1.5||1.4|
|Dry natural gas consumption, bcm||3.0||3.2||3.3||3.5||3.7||3.8||4.0|
|Refined products production & ethanol, '000b/d||100.7||101.7||102.7||103.7||104.7||105.8||106.9|
|Refined products consumption & ethanol, '000b/d||84.1||83.0||82.8||83.4||84.5||86.1||87.8|
The main trends and developments in Croatia's oil and gas sector are:
The Croatian Hydrocarbon Agency (CHA) announced in March 2015 announcement that offshore exploration would be delayed for trans-border consultations with Italy, Montenegro and Slovenia. Officials said further studies were needed regarding the environmental feasibility of current exploration plans. The development was expected to delay the formal award of PSAs with Marathon Oil, OMV, INA, Eni and Rockhopper following the 2014 offshore bidding round.
Tensions over the environmental impact of offshore oil and gas activity remains a source of political tension and regulatory uncertainty in Croatia, which depends heavily on tourism revenues. Activists have expressed concern about the potential negative environmental impact in the event of an oil spill. Tourism revenues could also be badly affected. The well-organised and persistent opposition saw Prime Minister Zoran Milanovic confirm in March 2015 that Croatia could hold a referendum on planned exploration in response to continued criticism. Calls for a national vote on offshore exploration are likely to deter investors and result in delays given increasing uncertainty surrounding support for the oil and industry.
Croatian officials said they hoped to complete a feasibility study for the proposed Krk Island liquefied natural gas (LNG) import terminal by the end of the year and take final investment decision in Q116. The facility would come online by 2020 at the southern end of a gas pipeline corridor connection Croatia and the port of Swinojscie in Poland. We have not yet included gas imports from the proposed LNG terminal but we note upside risk to imports, consumption and trade volumes, should the project be approved.
A consortium of US-based Marathon Oil and Austria's OMV won seven of 10 licences awarded in the country's first offshore bidding round. Croatian officials denied any disappointment with the result after several majors had earlier expressed interest but failed to submit bids. The CHA confirmed 15 of 29 blocks received offers but according to press reports majors dissuaded from bidding due the structure of the tender.
Economy ministry officials confirmed in February 2015 that seven bidders had submitted 19 different work programmes as part of an onshore bidding round open to international firms. The blocks included prospective acreage in the northern Drava river basin and in eastern Croatia. Officials did not provide details about the bidders, but major international companies were confirmed to be among the contenders.
The dispute between MOL, part owner of Croatia's two refineries, and the government remains unresolved. Both parties have filed arbitration claims against the other and the government has stated its opposition to MOL's plans to close at least one of the two reportedly unprofitable plants.