BMI View: Contested maritime borders have emerged as major source of uncertainty for Croatia's nascent offshore oil and gas sector. Tensions over borders and weak global prices, will weigh on the outlook for investment in Croatia's prospective but unproven offshore acreage. A positive investment decision on the proposed Krk liquefied natural gas (LNG) import terminal could boost demand for gas and see Croatia develop into regional supply hub.
|f = BMI forecast. Source: BMI, EIA|
|Crude, NGPL & other liquids prod, 000b/d||16.2||14.2||13.9||13.6||13.3||13.1||12.8|
|Dry natural gas production, bcm||1.8||1.7||1.7||1.6||1.6||1.5||1.5|
|Dry natural gas consumption, bcm||2.5||2.3||2.4||2.4||2.4||2.5||2.5|
|Refined products production & ethanol, 000b/d||82.8||83.6||84.5||85.3||86.2||87.0||87.9|
|Refined products consumption & ethanol, 000b/d||84.1||83.3||83.2||83.9||84.9||86.5||88.2|
The main trends and developments in Croatia's oil and gas sector are:
There is also concern about the impact of a maritime boundary dispute with Montenegro. Croatian Prime Minister Zoran Milanovic warned the unsettled boundary could deter investors. In July 2015, OMV and Marathon handed back offshore blocks awarded just months earlier by Croatian officials. The energy ministry confirmed the companies withdrew largely as a result of concerns over the border dispute with Montenegro. Three of seven blocks awarded during the offshore round lie in contested waters.
Croatian authorities announced plans for another offshore bidding round in September 2015, but given expectations for global oil prices to remain weak will likely weigh on interest in Croatia's prospective but unproven offshore acreage. Continued territorial disputes are also likely to undermine Croatia's ability to attract investors.
In July 2015, LNG Croatia, a joint venture formed by energy utility HEP and gas transmission system operator Plinacro, invited bidders for developing the terminal. Potential bidders have been given a 15 December deadline to submit proposals, which Croatian officials have declared strategic, facilitating faster approval and permitting. Economy minister Ivan Vrdoljak said the Croatian government should not have more than 25% of the terminal.
In August 2015, there were reports that Croatian officials could increase the capacity of the terminal in response to higher than expected interest from shippers. The non-binding open season which expired in May 2015 attracted 12 bids and the state-owned firm confirmed it would construct an onshore rather than floating terminal if FID is made. A decision on the project is expected in mid-2016 and commissioning expected in mid-2019.
INA issued a project management consultancy contract to Neste Jacobs Oy in July 2015 for a residue upgrade programmed at the Rijeka refinery. The investment is intended to improve the competitiveness of the plant by increasing production of more valuable products such as LPG, gasoline and diesel. Although the USD 400mn upgrade project at Rijeka, which was reported as ongoing in INA's 2014 annual report, suggest closure of the facility is not imminent, tensions between Croatian government and INA have persisted, and the profitability and sustainability of the domestic refining sector remains uncertain.