Croatia talking with energy majors on Adriatic gas

By bne IntelliNews April 30, 2013

bne -

The Croatian government says it has opened talks with Exxon Mobil, ConocoPhillips and General Electric over oil and gas exploration projects in the Croatian section of the Adriatic Sea.

In an interview published by Bloomberg on April 30, Economy Minister Ivan Vrdoljak said that the three companies are waiting for Zagreb to pass a new law on hydrocarbons research before committing to undertake any projects. The law - which would give priority to those companies involved in exploration to develop the fields - is expected to be passed in June, a month before Croatia's accession to the European Union.

Zagreb is keen to encourage offshore exploration to help meet an expected increase in gas consumption in the region. Pipeline operator Plinacro d.o.o. Croatia forecast in 2011 that gas consumption in former Yugoslavia and Albania will reach 11bn cubic meters a year by 2020. Developing offshore resources will help to meet this demand, as well as reducing the region's dependence on imports from Russia.

At the same time, that potential has Croatia seeking to raise pressure on those companies already present. Croatia's state-controlled INA and Italian giant ENI currently produce gas in Croatian waters, but have explained their lackluster interest for additional exploration licenses due to the fact that it would not automatically follow that the company which carried out the exploration would be allowed to continue to develop any fields to production.

"The greater competition could propel the price for exploration licenses, so the Croatian budget could gain higher revenue," point out Erste analysts in Hungary, who add that the effect for Hungarian energy giant MOL - which owns just under half of INA - will be negative. "This is a negative development for INA, MOL's Croatian arm," they write, "as the company wants to expand to the middle and southern part of the Adriatic Sea after developing several areas in the northern part of the Adriatic."

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