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Croatia and Montenegro to connect to TAP gas pipeline

The line will link Azerbaijani gas to Europe, but Balkan want some for their own energy resources

With Turkey breaking ground on 17 March on the gas pipeline that will bring Azerbaijani gas directly to Europe, Balkan countries are busy manoeuvring to feed into this flow of gas and develop the region’s own energy resources.

When the entire link is operational, at the end of 2018, the Trans Anatolian Gas Pipeline (TANAP) will carry an initial 16 billion cubic metres a year (cm/y) of Azerbaijani gas to European markets via Turkey, thus reducing the bloc’s energy dependence on Russia. From the Turkey-Greece border, 10bn cm/y of that gas will be transferred to the planned 20bn cm/y Trans Adriatic Pipeline (TAP), which will pipe it through Greece and Albania, and then across the Adriatic to Italy, where some will supply the domestic Italian market and the rest transited into Central Europe.

At the Adriatic Oil & Gas Summit in Budva, Montenegro on 10-11 March, Croatia and Montenegro both announced plans to connect to TAP by constructing a €700 million ($740m) gas pipeline along the Adriatic coast. 

“All the countries in the region want to get a link to TAP. This is also an opportunity for Montenegro to profit from gas from our future findings,” Montenegrin Minister of the Economy Vladimir Kavaric said on the sidelines of the conference.

Kavaric was referring to tenders that were launched last year for exploration licenses in 13 blocks, covering an area of just over 3,000 square kms, in Montenegrin waters in the Adriatic. In February, Kavaric’s ministry said it had begun talks with three international consortia that submitted bids in the tenders: Marathon Oil Corporation and Austrian energy firm OMV; Italy’s Eni and Russian independent gas firm Novatek; and UK-based Mediterranean Oil & Gas and Greek Energean Oil & Gas.

After completing the negotiations, the economy ministry will submit a report on the tender process to the government as well as concession agreement draft proposals, and the final decision will be taken by the Montenegrin parliament.

There are no reserve estimates for what Montenegrin waters might hold, but exports say there are analogues in Italy and Albania, such as the Barbara field in Italian waters in the northern Adriatic, which produces from similar high quality Pleistocene sands. The field has reserves of around 1.4 trillion cubic feet of gas, according to GEOExPro.

It is Croatia, though, that is best placed to become a major regional oil and gas player and is furthest ahead in its plans to develop and transport energy resources.

At the conference, Economy Minister Ivan Vrdoljak said the Croatian government is set to commission a feasibility study for a liquefied natural gas (LNG) import terminal in the northern Adriatic, which would serve central and southeast European markets. A gas pipeline will connect the terminal to Hungary – a scheme that will include Slovenia and Serbia when completed.

“We are due to sign a deal with consultants who will complete a feasibility study by the end of this year,” Vrdoljak said. “The final decision will be taken in the first quarter of 2016.”

The terminal, which would be built on the island of Krk in the Adriatic, has been given a boost by Russia’s decision to abandon for reasons of economics and EU ambivalence its planned giant South Stream gas pipeline, which would’ve brought Russian gas up through southeast Europe into central Europe. The terminal is seen costing around €600m with a capacity of 4bn-6bn cm/y.

“After the cancellation of the South Stream pipeline project this is the most realistic and logical project for southeast and central Europe” Mladen Antunovic, managing director of LNG Croatia, told Reuters.

As part of its upstream efforts, the Croatian government in January awarded five companies in three consortiums with ten licences for exploration. The consortium of Marathon Oil and OMV obtained seven, the Croatian-Hungarian firm INA obtained two, and the consortium of Eni and British Medoilgas got one licence.

A survey by Spectrum, a Norwegian seismic-imaging company, has estimated that Croatia’s offshore reserves could total up to 3 billion barrels of oil equivalent offshore. Though some see this as overly optimistic, the amounts have nevertheless caught the eye of US and European policymakers who are looking for any edge to counter Russia’s use of its energy supplies to influence Europe. 

However, opposition to Croatia and Montenegro developing its offshore resources is growing.

The Budva conference was picketed by environmental groups opposed to any development on the grounds it would harm the environment and damage Croatia’s crucial tourism industry. They have called for a referendum on hydrocarbons exploitation, which on March 16 Croatian Prime Minister, Zoran Milanovic appeared to accede to, saying in a statement posted on the government’s website that a referendum could be organised if oil and gas in sufficient amounts are discovered in the Adriatic. 

And on 17 March, Croatia’s hydrocarbon agency, CHA, the body responsible for managing tenders on hydrocarbon exploration, told BalkanInsight that the start of oil and gas exploration in the Adriatic will be postponed by several months because of concerns that have been raised by Croatia’s maritime neighbours. Italy, Montenegro and Slovenia, the CHA said, will be given time to send comments and complaints about any potential ecological and environmental threats caused by exploration and exploitation activities, meaning the signing of contracts with the companies that have obtained licenses will happen in June, instead of April.

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