Friday, 8 March 2019

Hungary Warming up to Croatian LNG Terminal?

ZAGREB, March 8, 2019 - Hungarian Minister of Foreign Affairs and Trade Peter Szijjarto met with Croatian Minister of Environment and Energy Tomislav Ćorić in Budapest on Thursday, saying that Hungary's energy security would improve with a gas supply route from the south, presumably meaning the LNG terminal.

Both sides agreed that energy supply security in Central Europe remains one of the most important regional risks and they confirmed their commitment to deepening cooperation in the energy sector, the Hungarian ministry said in a statement quoted by MTI news agency. The statement said Hungary's energy security would greatly improve if it were able to get gas from the south.

Mr Szijjarto and his Croatian counterpart "acknowledged the importance of a final decision taken by the Croatian government on the construction of an LNG terminal on the island of Krk as well as the construction of a compressor station that would allow bidirectional operation of the gas interconnector between Hungary and Croatia," the statement said.

In late January, the Croatian government adopted a decision to finance the first stage of a floating LNG terminal on Krk, which is estimated at 234 million euro.

According to the government's decision, Croatia would secure 100 million euro from the state budget for the LNG terminal project, 50 million euro in 2019 and another 50 million euro in 2020, and before the payments are made, Croatia's electricity provider Hrvatska Elektroprivreda will secure loans to the LNG Hrvatska d.o.o. company to cover payments due in 2019.

The remaining funds of 32.6 million euro would be secured by LNG Hrvatska, Hrvatska Elektroprivreda and Plinacro.

The gas pipeline company Plinacro in February announced that the construction of the first compressor station for Croatia gas transportation system (KS1) was going according to plan. The value of that facility is estimated at 210 million kuna and the station could be up and running by the end of the year.

In addition to Plinacro's 75 bar transport system, the compressor station will enable an additional 500 million cubic metres of gas to be transported annually from Croatia to Hungary. Once the Omišalj-Zlobin pipeline is constructed that will connect the LNG terminal on Krk with Croatia's gas transportation system, it will be possible to transport 1.6 billion cubic metres of gas a year.

KS 1 is essential in the context of the Central and South Eastern Europe Energy Connectivity (CESEC) initiative and a Memorandum of Understanding between Croatia and Hungary was signed in that regard which led to an agreement on the establishment of two-way capacities on the existing interconnector between Croatia and Hungary on the Donji Miholjac - Dravaszerdahely route.

More news on the LNG terminal can be found in the Business section.

Tuesday, 5 February 2019

LNG Terminal Allegedly Not Affected by Slovenian-Hungarian Gas Link

ZAGREB, February 5, 2019 - The planned Slovenian-Hungarian gas interconnection has no effect on the project to build an LNG terminal on the island of Krk or on the expected lease of its capacity by countries in Croatia's neighbourhood, the Environment and Energy Ministry told Hina on Tuesday.

"Projects that are of common interest in the EU are projects that primarily connect the energy infrastructure of EU member-countries. The interconnection between Slovenia and Hungary will connect the two countries' gas networks and there is no direct link between it and the development of the LNG terminal on Krk and the gas to be supplied by the terminal," officials at the ministry told Hina when asked to comment on announcements that the Slovenian-Hungarian gas interconnection would be built due to, among other reasons, the uncertain implementation of the Croatian LNG terminal.

"The planned Slovenian-Hungarian interconnection will be implemented after the LNG terminal becomes operational and it does not affect the implementation of the Krk terminal project or its expected lease by neighbouring countries in the coming period," the ministry official said.

They recalled that the gas interconnection between Croatia and Slovenia at Rogatec, apart from transporting gas from Slovenia to Croatia, also enabled transport from Croatia to Slovenia.

Hungary and Slovenia have applied jointly for EU funding to build an interconnection linking the two countries' gas networks, which would enable Hungary to import liquefied natural gas from Italy, Hungarian Foreign Minister Peter Szijjarto has told the Hungarian news agency MTI.

Given the current uncertainty regarding the construction of the LNG terminal in Croatia, the fact that the price offered by Croatia is markedly above the market price and the uncertainty as to when U.S. and Austrian gas companies will be able to start with gas exploitation on Romanian gas fields at sea, Hungary must establish new gas supply routes, said Szijjarto.

One scenario envisages the import of liquefied gas via Italian ports, he said, but noted that the infrastructure that would enable Hungary to buy liquefied gas directly from Italy had still not been established.

That is the reason why Hungary has signed the agreement with Slovenia, Szijjarto said, adding that connecting the two countries' gas networks would enable Hungary to import gas from Italy. The Hungarian minister also said that talks were underway on the necessary capacity of the interconnection to link the two countries' gas networks. The European Council is to make a decision on the matter in the spring, he added.

The Croatian government last week made a decision to finance the first stage of the floating LNG terminal on Krk, whose total value is estimated at 234 million euro.

The European Commission has approved grants for the project in the amount of 101.4 million euro since the project is on the EC's list of projects of common interest. The government's decision was welcomed by US Ambassador Robert Kohorst.

More news on the LNG terminal on Krk can be found in the Business section.

Friday, 1 February 2019

US Ambassador Congratulates Croatia on Decision to Fund LNG Terminal

ZAGREB, February 1, 2019 - The U.S. Ambassador to Croatia, W. Robert Kohorst, on Friday congratulated the Croatian government, Prime Minister Andrej Plenković and Energy Minister Tomislav Ćorić on the decision to finance the construction of the future LNG terminal on the Adriatic island of Krk.

"Congratulations to the Croatian government – particularly Prime Minister Plenković and Minister Ćorić – for approving funding for the Krk LNG terminal," reads the ambassador's statement.

"This project is an investment which maximizes Croatia’s gas supply options and makes a major contribution to regional gas supply diversification and security. The terminal will make LNG imports from a wide-range of suppliers possible and this competition will ensure the best gas prices," reads the statement posted on the embassy's website.

The diplomat says he is "pleased to see our strategic partner and ally taking such a positive leadership role."

On Wednesday, the Plenković cabinet adopted a decision on financing the first, 234 million euro stage of the LNG terminal project.

The estimated value of the project includes a specific vessel, that is the Floating Storage and Regasification Unit worth 160 million euro, and the construction of the infrastructure necessary for receiving, storing, reloading and regasification of liquefied natural gas, which is likely to cost 60 million euro, while the compensation for the expropriation of the land will require 14 million euro.

In 2017, the European Commission approved a 102 million euro grant for the construction of the floating LNG terminal off Krk.

The government is to set aside 50 million euro in 2019 and 2020 each for the project.

The remaining amount of 32.6 million will be provided by the founders of the LNG Croatia company, the HEP national electricity provider and the Plinacro gas network operator.

Energy Minister Ćorić told the cabinet that the LNG project was of strategic importance for Croatia and would contribute to the country's energy independence and security.

More news on the LNG terminal in Croatia can be found in the Business section.

Thursday, 31 January 2019

Russia Has Nothing against Croatian LNG Terminal Construction

ZAGREB, January 31, 2019 - Russian Ambassador to Croatia Anvar Azimov said on Wednesday that Russia had nothing against building the Croatian LNG terminal, adding however that his country was prepared to deliver cheap Russian gas to Croatia as much as necessary.

Asked to comment on the energy situation in Croatia, given that the government approved the purchase of the water-based LNG terminal, Azimov said Russia was interested in seeing Croatia always be a safe country energy wise.

Azimov said that on the energy diversification front, the source of the gas supply was always important, that this moment Russian gas was still the cheapest and that Russia last year released two billion cubic metres of gas to Croatia. He said Croatia would always be interested in buying cheap Russian gas.

The Russian ambassador said that last year EU member states imported over 200 billion cubic metres of gas and that Russia has proved itself as a safe partner.

Azimov said that if the floating LNG terminal was to be built, Russia would be happy if it would benefit Croatia. He, however, said he was confident that Croatia and the entire Europe would be interested in cheap Russian gas. Russia is prepared to supply Croatia with gas as much as necessary, he said.

The Russian Ambassador was in Rijeka where he attended the annual meeting of the Croatian-Russian Friendship Society session and spoke about challenges in 2019.

He said that the latest developments in relations between the United States and Russia and Russia and the EU were not good.

The ambassador said sanctions were unfounded and that apart from Russia they also affected the EU and Croatia.

He said Russia was prepared to defend its partners and friends and that it wold not agree to a model on which the United States insisted, stressing that not a single country could control the others.

Azimov said that following Croatia's entry into NATO and the EU, relations between Croatia and Russia had deteriorated, but that Russia was confident that Croatia had made the right choice which suited its interests, namely that Russia respected the fact that Croatia had joined NATO and the EU because that was a reality.

He said it was difficult for him to hear the Croatian government say that its strategic partner was the United States and that there was no mention of Russia. Azimov underlined that Russia was prepared to invest in Croatia and issue loans to it, but that strategic partners were against it.

He underscored that Croatia-Russia relations were now growing, that Croatian President Kolinda Grabar-Kitarović made a huge contribution to that, as did Zagreb Mayor Milan Bandić.

More news on the relations between Russia and Croatia can be found in the Politics section.

Wednesday, 30 January 2019

Government Approves Financings for First Stage of LNG Terminal

ZAGREB, January 30, 2019 - Environment Protection and Energy Minister Tomislav Ćorić on Wednesday told a press conference that the operating costs of the LNG terminal on the island of Krk would be covered from an existing lease and security of supply fees (S.O.S fees).

Questioned by reporters following a cabinet meeting at which a decision was adopted on financing the first stage of a floating terminal project, whether there were any figures of the LNG terminal's business over the next 10 to 15 years, Ćorić said that he expects the terminal's operating costs to be settled from an existing lease and S.O.S. fees which will primarily depend on how negotiations between the terminal's owner - LNG Croatia - and potential future lessees would end.

"In that context, talks will continue over the next few weeks and months on that topic between our side and the Hungarian side, given the letters of intent that we received in the last phase of binding bids for the terminal's leasing. We believe that for that reason the S.O.S fee as of 1 January 2021 will have a minimum, if at all, effect on the price of gas in Croatia," Ćorić said.

If the terminal's lease remains at the current 520 million cubic metres of gas, the S.O.S fee will impact the price of gas by one percentage point compared to the current market price of gas, which means an amount of about 35 kuna a year for a household with an average consumption, he added.

"We firmly believe that in the coming weeks and months more LNG gas will be leased and in that context the share of the S.O.S. fee will decrease over the next two years remaining before the terminal starts operating, said Ćorić.

He noted that since the start of this year, Plinacro's fee for gas transmission through Croatia was reduced by 20 percentage points and that the total burden of the S.O.S fee, which should be operational as of 1 January 2021, for example on the price of gas in December of the previous year, will amount to about 0.1%.

Reporters asked Ćorić about communication with the local community given the protests against the construction of a floating terminal.

To the residents of Omišalj and Krk who are concerned about the ecological aspect and the age of the LNG conversion tanker, he said the age of the ship could definitely not be a problem and that sea water would not be used on the regasification ship, so chlorine would not be released into the sea.

He added that the LNG terminal on Krk island would in no way endanger the environment and that it would bring the local community financial benefits.

"The capacity of the LNG terminal on Krk island, 2.6 billion cubic metres, is actually the capacity of Croatia's total annual consumption. This project isn't necessary only to Croatia. It also enables the surrounding countries to diversify their supply routes and make gas procurement for their markets safe."

As for making the project commercial, Ćorić said the government believed in a positive outcome of talks with potential partners.

Event with the current 520 million reserved cubic metres, the financial construction for both investors is financially justified and brings, along with the introduction of the security of supply fee, a very acceptable contribution rate for both investors -- HEP and Plinacro.

Asked about the influence of TurkStream, which targets the markets of Hungary and Austria, on the business activities of the terminal on the Krk island, Ćorić said that the prices of gas from the LNG terminal were not 30% higher than the prices of gas from classic gas pipelines, as suggested by a reporter.

The minister warned that Qatar was leaving OPEC precisely because it had decided to increase the production of LNG gas and the presence on the global market, adding that the production in the United States has been growing by the day. The minister also said that the price of LNG gas would correspond to the price of natural gas.

More news on Croatia’s LNG terminal can be found in the Business section.

Friday, 18 January 2019

Croatia to Pay for LNG Terminal Despite Lack of Interest?

Croatian Minister of Environmental Protection and Energy Tomislav Ćorić said on Thursday that the state is interested in the construction of the LNG terminal on the island of Krk and that it is a strategic project that deserves to be funded, reports Jutarnji List on January 18, 2019.

As he told reporters on the eve of the government session, it is a strategic national project for Croatia that is needed given that it would provide the security of gas supply to Croatia, regardless of any possible crisis, and "there have been such crises in the past.” In this context, Ćorić said, the project deserved to be funded.

Reminded by journalists that there was no interest for leasing the terminal’s capacities by potential buyers of gas, Ćorić said that "there is always an interest for security, believe me.” “If you understand the concept of security, then you realise that there is interest for security. The fact that the EU will finance this project with 100 million euros clearly shows its importance, above all for the security of supply and diversification of gas routes,” Ćorić said.

He added that there is interest, but that it is impossible to know what the gas prices would be in 2021 when the Krk terminal is supposed to become operational.

Finance Minister Zdravko Marić, asked about the impact of the project on the state budget, given that Minister Ćorić stated that, if necessary, the state would bear the costs, said that this was an important strategic project for Croatia and its energy perspective. He noted that the budget for this year had been passed. But, he added, if certain priorities come up later, as was the case in previous years, it was possible to discuss them and assess the fiscal effects. "We are carefully considering all important strategic projects, and I think this one is such a project because we are talking about Croatia's energy independence and perspective," Marić said.

Deputy Prime Minister Predrag Štromar said that he supported the LNG terminal as an alternative energy supply route. “We know there were crisis and gas prices were rising, we know there was even the possibility that there would not be enough gas, and we must always have an alternative," said Štromar.

In December, the LNG Croatia company received binding bids for 520 million cubic metres for the lease of planned capacities, as well as two non-binding conditional bids for 300 million cubic metres.

This is substantially less than 1.5 billion cubic metres, which is minimally necessary for the terminal to be cost-effective. The LNG terminal on the island of Krk is planned as part of the EU's effort to import gas from multiple sources, and not mainly from Russia. The target markets are the countries of Central and South Eastern Europe, which however do not seem to be very interested.

The total cost of the construction of the LNG terminal with the delivery pipeline is estimated at 265 million euro, and the EU is ready to invest 101.4 million euro in the project. The planned start of operations has been delayed repeatedly and is currently 2021.

More news on the LNG terminal can be found in the Business section.

Translated from Jutarnji List.

Tuesday, 15 January 2019

INA Restructuring and LNG Terminal Remain a Priority

ZAGREB, January 15, 2019 - Environment and Energy Minister Tomislav Coric said on Tuesday that the government wanted a successful and profitable INA, adding that this required restructuring of this oil company's refineries. He also spoke about the LNG terminal.

"The aim of the government is to ensure a successful, profitable and vertically integrated INA. A successful and efficient INA has no alternative," Ćorić told a press conference dedicated to energy issues.

He, however, added that this wish does not correspond with the present state of INA's oil refineries, as the one at Rijeka operates at 70 to 80 percent capacity and the one at Sisak at 30 percent.

Ćorić said that the planned transformation of the Sisak plant would ensure the largest possible employment and that it was tied to investment in the Rijeka refinery and other business segments. He noted that the conversion of the Sisak refinery into an industrial centre has been decided by INA's management and supervisory boards and it "has no alternative, regardless of the size of the government stake in INA."

Asked if he had any message for the workers at Sisak, he said that their future would not be uncertain and that under the business plan 40 to 50 percent of them would be retained at the Sisak complex.

Ćorić said that the government had not abandoned its idea to buy back the Hungarian energy group MOL's stake in INA, noting that this was a very complex process.

Asked if the proposed legislative changes could make it possible for MOL to acquire a majority stake in INA, Ćorić said that if MOL or any other company had such an intention it would first have to present its long-term plan for INA to the government to see that this would not have an adverse effect on the country's energy stability.

The proposed amendments to the INA Privatisation Act are under public consultation until January 22. Their purpose is to align this law with EU legislation.

When explicitly asked if there was a deal with the Hungarians to leave INA to them, Ćorić replied in the negative.

Speaking of Croatia's plan to build an LNG terminal on the northern Adriatic island of Krk, Ćorić recalled that the state-owned power company HEP had booked 520 million cubic metres of the terminal's capacity, while the booking of 1.5 billion cubic metres was required to make the terminal profitable, and that two letters of intent had come from Hungary inquiring about the possibility of entering the ownership structure of the future terminal.

Despite the modest interest in the booking, Ćorić said that "as long as this government is in office, the LNG will be without an alternative the dominant energy project."

He announced further talks with the Hungarians, saying that this was a strategic project, not only for Croatia, which could become increasingly dependent on gas imports, but also for Europe, especially for countries such as Hungary and Ukraine.

Asked about the possibility of renewing oil and gas exploration and exploitation in the Adriatic, Ćorić said that there were indeed indications of considerable quantities of gas existing in the Adriatic, that he was "neither in favour nor against" and that a consensual decision should be taken on this issue.

More news on the LNG terminal project can be found in the Business section.

Friday, 21 December 2018

Future LNG Terminal on Krk Receives Binding Offers for Lease

ZAGREB, December 21, 2018 - The LNG Croatia company has received binding offers for the lease of 520 million cubic metres of gas from the future LNG terminal on Krk and two conditional offers for the non-binding lease of 300 million cubic metres, the company said on Friday.

The deadline for submission of bids in the second round of the Open Season procedure for booking the terminal regasification capacities was 20 December 2018, after two earlier extensions of the deadline.

"LNG Croatia received bids for binding capacities booking of the LNG terminal on Krk in the amount of 0.52 billion cubic meters. In addition to the offers for binding capacities booking, conditional bids for non-binding capacity booking in the amount of 0.3 billion cubic meters were received," the company said on its website.

This is considerably less than an estimated 1.5 billion cubic metres required to make the investment in the construction of the terminal profitable.

The company said that an analysis of the economic test based on the bids received would follow.

According to unofficial media reports, two Croatian companies made binding offers for capacity booking - the INA oil company for about 100 million cubic metres and the HEP power company for about 400 million cubic metres. The Hungarian MVM electricity group apparently did not make a bid.

Reporting on a meeting between Croatian Environment and Energy Minister Tomislav Ćorić and Hungarian Foreign Trade and Foreign Affairs Minister Peter Szijjarto in Budapest in early October, MTI news agency said that Hungary could annually import 1.7 billion cubic metres of gas from the Krk LNG terminal, adding that the two countries would approach the European Commission to set prices of gas delivery to Hungary from the Croatian LNG terminal.

The capacity of the floating LNG terminal on Krk was planned at 2.6 billion cubic metres annually, which would require booking of at least 1.5 billion cubic metres to make the investment profitable.

Speaking to reporters last month, Minister Ćorić mentioned a possibility of the government co-funding the LNG terminal in case of capacity underbooking. "I believe that the Krk LNG terminal is a great strategic interest and that, if necessary, Croatia should consider co-financing the terminal," he said then.

The Krk LNG terminal is planned as part of efforts by the European Union to secure gas imports from multiple sources rather than mainly from Russia. The targeted markets are central and southeastern European countries.

The total cost of construction of the LNG terminal with a gas pipeline is estimated at 265 million euro, with the EU to invest 101.4 million euro in the project. The terminal is scheduled to start operating in early 2021.

More news on the never-ending story about future LNG terminal can be found in our Business section.

Wednesday, 12 December 2018

LNG Terminal on Krk Is Unnecessary, Say Environmental NGOs

ZAGREB, December 12, 2018 - The nongovernmental organisations Green Action and Friends of the Earth Europe have published a report claiming that the planned construction of a LNG terminal on Krk is contrary to the Paris Agreement on the reduction of greenhouse gas emissions and that the project is unnecessary, expensive and contrary to the interests of local residents and environmental protection, as well as that the government, the main stakeholder in the LNG Hrvatska company, should give it up.

"Considering the existing gas infrastructure and projects under way in the region, Croatia and its neighbours are already secure in terms of energy and sufficiently resilient," the NGOs say.

The Green Action claims that the project, motivated by the struggle against Russia's domination on the gas market, is a failed strategy because the existing infrastructure has not been sufficiently used and the project will result in more Russian gas in Europe.

The construction of the terminal is also not in line with the Paris Agreement obliging EU members to reduce their greenhouse gas emissions by 40% by 2030, the NGOs say.

The project is also contrary to this year's report of the Intergovernmental Panel on Climate Change, the NGOs say, warning that gas is a carbon intensive fossil fuel that harms climate and therefore cannot be considered a transition fuel.

"There are other solutions to improving the energy security of Croatia and neighbouring countries and decarbonising their energy systems and those solutions have been proven to be more cost-competitive and more sustainable," the two NGOs said, calling for reducing energy needs through energy efficiency programmes and the use of renewable energy sources.

More news about the never-ending planning for the LNG terminal on the island of Krk, which might or might not ever be constructed, can be found in our Business section.

Friday, 30 November 2018

Croatia Can Become Regional Energy Leader, Says US Official

ZAGREB, November 30, 2018 - US Assistant Secretary of State for Energy Resources Francis R. Fannon said on Friday that by building an LNG terminal, Croatia had the opportunity to use the new situations in the world of energy and become a regional energy leader.

Energy encourages economic growth and helps countries in self-determination and sovereignty, he said at a round table for journalists in Zagreb. We live in extraordinary times in terms of energy because of newly discovered fields around the world and progress in extraction technology and fuel production, he added.

Fannon arrived in Croatia after visiting Israel, Cyprus and Egypt where, over the past decade, large reserves of natural gas have been discovered which he said should find a way to Europe across Croatia in a few years.

Earlier this month, the LNG Hrvatska company selected a Norwegian bid to build a floating terminal expected to become operational in early 2021. The supplier of the terminal has not been selected yet.

Aside from Israel, Cyprus and Egypt, Fannon mentioned the US, Australia and Qatar as possible natural gas sources. Croatia has the opportunity to become the leader in the procurement of gas from many sources, he said.

US Ambassador Robert Kohorst said at the round table the buyers of the gas from the LNG terminal on Krk island would mainly come from Southeast Europe, given that the north of the continent has other sources.

The International Energy Agency said earlier this month that natural gas would replace coal as the second energy source in the world by 2030, with annual growth of 1.6%, the first being oil.

We must look at energy in a new context. It would be a mistake to expect things to stay as they are, Fannon said, noting that US oil production jumped from six million barrels a year in 2012 to 11 million today. That's an incredible growth, and the situation is similar with gas, he added.

Despite the fact that, according to the Financial Times, the 20 LNG terminals in Europe work at one fourth of their capacity, Fannon said building such an infrastructure created a broad strategic advantage.

More sources create a more competitive environment, he said, adding that Lithuania reduced the gas price by building a terminal and that depending on one supplier was not healthy for any state.

Fannon welcomed Croatia's new initiatives to explore energy sources on its territory. We are glad that Croatia has embarked on an independent energy journey and that it wants to be a regional energy hub, he said.

In October, the Croatian government decided to invite bids for hydrocarbon exploration and exploitation at seven land locations. Bids can be submitted by June 2019.

Earlier on Friday, Prime Minister Andrej Plenković met with Fannon who confirmed his country's support for the construction of the liquefied natural gas (LNG) terminal on the northern Adriatic island of Krk, the Croatian government said in a statement.

For more on the LNG terminal that is supposed to be constructed in Croatia, click here.

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