Croatia, Montenegro might opt for joint oil and gas exploration in Adriatic Sea

By bne IntelliNews May 14, 2013

Croatia’s economy ministry plans to offer Montenegro to open a joint tender for oil and gas exploitation and exploration in the Adriatic Sea, an anonymous source from the ministry told Croat daily Vecernji List earlier this week.

According to the source, this would be a logical move since a joint bid would raise the value and the attractiveness of the deal and result in bigger profits for all sides involved. Furthermore, such a deal could serve as a starting point for solving the territorial disputes around the sea border between the two countries.

Sources from the Montenegrin economy ministry told news agency Mina Business they have not yet received any such offer from their Croatian counterparts but added the ministry is certainly ready to consider all initiatives regarding the joint oil and gas tender for the sea border area.

Earlier this month the Croatian government adopted a bill on hydrocarbon exploration and exploitation, aiming to facilitate the exploration and exploitation of the country’s potential gas and oil reserves and to open the market for foreign companies.

The bill is expected to attract major global energy giants and bring billions of dollars in revenue for Croatia as media reports suggest US oil company Exxon Mobil is one of the potential investors to come to the Adriatic country.

Croatia's Adriatic coast is expected to have rich reserves of hydrocarbons, similar to these in the Italian region of the Adriatic, which has about 180 drilling platforms (versus only 14 in the Croatian sea area), since the Croatian and Italian regions of the Adriatic Sea have the same geological structures, HINA informed.

In a separate report, Vecernji List informed that the Croat government hopes annual offshore hydrocarbon exploitation could bring 6-7 billion cubic metres of gas plus they would have further 2 billion cubic metres onshore. In this case the GDP is seen rising by around HRK 10bn (EUR 1.3bn), or 3%.

On the other hand, Montenegro is also expected to soon open an oil and gas exploration and exploitation tender after the economy ministry prepared and submitted to the government the draft of the public invitation earlier this year. The government is due to adopt a special law on the sector's taxation in the second quarter of 2013.

Montenegro decided in mid-2012 which blocks would be included in the future hydrocarbon concessions. The total area that will be offered under concession to oil companies is 3,191 square kilometres, divided into 13 blocks, the government said back then. It also defined a fiscal framework envisaging the introduction of fees for oil and gas, and extra taxes. For oil production the framework determines a fee from 5% to 12%, while for gas production - 2%. The extra tax would amount to up to 59% of the profit from oil and gas production.

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