bne IntelliNews -

Croatia will commission a feasibility study for a planned liquefied natural gas (LNG) terminal on the island of Krk by the end of this year, paving the way for a decision to be made on the project in early 2016, Economy Minister Ivan Vrdoljak said on March 10.

Construction of the LNG terminal has become a priority for Zagreb after the outbreak of the Ukrainian conflict put supplies of Russian gas supplies to Europe - delivered via Ukraine - at risk. This became more urgent after Moscow cancelled the planned South Stream gas pipeline project, which would have transported Russian gas to Southeast Europe, bypassing Ukraine. The terminal would provide an alternative source of gas for both Croatia and neighbouring countries. 

Croatia is also looking at plans for a gas pipeline along the Adriatic coast to Montenegro, which would connect to the Trans Adriatic Pipeline (TAP) that will transport gas from Azerbaijan into Central Europe.

Zagreb is planning to sign a deal with consultants to carry out the feasibility study on the terminal, which will have capacity of between 4bn and 6bn cubic metres (cm) per year. “The final decision will be made in the first quarter of 2016,” Reuters quoted Vrdoljak as saying. If the project goes ahead, construction is expected to be completed by 2019 or 2020.

Mladen Antunovic, managing director of LNG Croatia, the company set up to build and operate the infrastructure for receiving, storing and degasifying LNG, said the company would invite expressions of interest from potential investors in the project before July.

With its coffers empty, Zagreb hopes to pin down candidates to share construction costs by next year. The Adriatic country plans to have a maximum share of 25% in the terminal. The European Commission, which supported the idea of the LNG terminal's construction, has already warned Croatia the project is developing too slowly.

Croatia has ambitions to use the Krk terminal as part of its plans to become a regional energy hub. In December last year, Poland and Croatia agreed on a strategy to link their respective LNG terminals on the Baltic and Adriatic Seas. The scheme would provide a link spanning Central and Eastern Europe from north to south.

At the same time, Croatia is developing its own oil and gas resources. Zagreb has already awarded 10 licenses for hydrocarbons exploration and exploitation in the Adriatic Sea and has organised a tender for onshore exploration and production of hydrocarbons in the northeastern part of the country.

Also on March 10, Vrdoljak and his Montenegrin counterpart, Vladimir Kavaric, said that Croatia and Montenegro plan to construct a €700mn gas pipeline along the Adriatic coast and link it to the TAP by 2020, Bloomberg reported. TAP will transport gas from Azerbaijan’s offshore Shah Deniz field from the Turkish border via Greece and Albania to Italy.

The proposed Croatia-Montenegro pipeline could also offer Montenegro an opportunity to profit from any future gas discoveries, Kavaric said. An interconnector would lead from the Albanian town of Fier towards Montenegro and Croatia where it will join the existing pipeline at Split before ending at Krk.

Croatia is one of several European countries considering LNG regasification terminals as a way to increase their energy security.

Across the Adriatic from Croatia, Italy’s Adriatic LNG Terminal located offshore from Porto Levante near Venice has a capacity of 8bn cm a year, or around 10% of Italy’s natural gas demand. The terminal was built to regasify LNG imported from Qatar’s North Field under a long-term supply agreement between Edison and Qatar’s RasGas. Gas Natural Fenosa wants to build another LNG terminal in nearby Trieste.

Turkey already has two terminals processing LNG imported from Algeria and Nigeria. State gas pipeline operator BOTAŞ is now considering two additional terminals to be located close to Turkey’s borders with Bulgaria and Greece, which would allow the country to supply EU markets, Hurriyet Daily News reported in October 2014.

Italy’s Gruppo Falcone announced back in 2008 that it had signed a €1bn agreement with the Albanian government to build an LNG regasification terminal near Levan and a sub-sea pipeline to transport some of the gas from the terminal to Italy. However, the project is still at the planning stage. Another Balkan state, Montenegro, is also considering options for a terminal at Bar.

Meanwhile, Cyprus is keen to build a LNG export terminal to transport gas from its offshore fields to international markets, though the project will depend on whether ongoing exploration work shows the project to be viable.