Gazprom Signs Ten-Year Gas Delivery Contract with Croatia

By 18 September 2017

The agreement was signed with Prvo Plinarsko Društvo from Zagreb.

Russia’s Gazprom and Prvo Plinarsko Društvo (PPD – First Gas Company) from Zagreb have signed a long-term gas supply contract which will remain in effect until the end of 2027. Gazprom will deliver one billion cubic metres of gas annually, reports Večernji List on September 18, 2017.

The agreement comes into force on 1 October and represents an extension of the current short-term contract between Gazprom and PPD, according to which 1.48 billion cubic metres of gas were delivered to PPD starting from the beginning of 2017. In the fourth quarter of this year, another 250 million cubic meters are expected.

Gazprom did not disclose details of the new contract, but it is believed that the price will be determined in accordance with the price movements at the Baumgarten gas hub.

From 2012 to 2016, deliveries of natural gas from Russia to Croatia were realised by the Gazprom Swiss company, and earlier contracts with Gazprom were signed by INA and Prirodni Plin (Natural Gas) companies.

With the headline “Croatia Returns to Gazprom”, the Russian daily Kommersant reports that the Russian company, “for the first time since 2010, has returned to the role of being the key gas supplier for Croatia.” Sources say that the signing of such a long-term contract has been rare in the European market in recent years and “shows the absence of clear alternatives to Russian gas.”

They note that the contract between Gazprom and PPD “almost entirely covers Croatian gas import needs, which brings into question the realisation of the LNG terminal project on the island of Krk. The final investment decision on the project must be made during 2018.”

“The return of Croatian importers to long-term contracts with Gazprom, after experiments with short-term contracts, shows that there is no serious alternative to Russian gas in the northwestern Balkans,” said Alexei Grivach from the Russian National Energy Security Fund. In his view, the current practice of revising the contracts every two to three years has shown the benefits of signing long-term contracts instead.

As far as the LNG terminal on Krk is concerned, Grivach believes that “even if the project were to be implemented, its purpose could only be to cover increased seasonal demand and would most likely operate with a low level of capacity occupancy.”

Translated from Večernji List.