Croatia: How much is Russia interested in investing in the Croatian energy sector?

17. July 2014. / SEE Energy News

The head of Gazprom Alexei Miller visited Zagreb on Wednesday, July 9th. Miller meet with Croatian President Ivo Josipovic in the Presidential residence in Pantovcak, and besides oil and gas exploration in the Adriatic, INA’s was the topic of conversation.

After the Norwegian Spectrum established oil and gas positions, types, and reserves in the Croatian part of the Adriatic Sea, Croatia Ministry of Commerce has opened a tender for exploration and exploitation of resources. Competition was opened in April by the Minister of Economy Ivan Vrdoljak, and on this occasion in Zagreb gathered representatives of some 40 the world’s largest energy companies, including representatives of Exxon, Shell, INA, and the Russian companies Gazprom and Lukoil.

In the last few months Spectrum has filming the geological formations of the Croatian undersea and it did not exactly determine the oil or gas existence. But a great interest of energy companies confirms that certainly there are strong indications that this area is rich in energy resources. Unofficially they mentioned stocks of 2.87 billion barrels of crude oil, by which Croatia would be ranked at the second place for its oil reserves in the whole EU, writes renowned Financial Times. 29 oil fields area of 1020 to 1635 square kilometers are determined by the contest. Concessions for exploration will last five years with the possibility of extension for another one, and manufacturing licenses will be issued for 25 years. Croatia should get 54 percent of the revenue from oil production and 60 percent of natural gas production through the concession model.

Russian gas giant Gazprom has signed an agreement with the Austrian company OMV, which will build the South Stream pipeline in Austria. However, according to experts interviewed by “Ruski Vjesnik”, this agreement is rather political than business, and it will not affect the complex situation of the project.

Croatian media have been talking for years about more powerful entry of Russian companies in the Croatian energy market. Russian companies were mentioned in the context of overtaking the INA shares from the current majority owner of the Croatian energy company, Hungary’s MOL. The oil and gas exploitation in the Croatian part of the Adriatic seems like an ideal opportunity to join the Russians in the region which represents interesting energy market.

This also confirmed the professor of Mining, Geology and Petroleum Engineering in Zagreb Igor Dekanic in a statement to the “Ruski Vjesnik”, and who says this part of Europe is an interesting area for expansion of investment activities of Russian energy companies. “It is difficult to predict the final result of the competition, but it is certain that he represents an opportunity for Russian companies, especially those like Gazprom Neft, Gazprom’s daughter company, which is already present in the region”, continued Dekanic and concludes that after obtaining this job the Croatian public would have better opinion about the international consortium in which one or more Russian oil companies would participate.

The Croatian Prime Minister Zoran Milanovic has recently commented on the Croatia’s energy situation who said that on the energy issues should be discussed technically, not politically. “If Gazprom wants to explore gas in Croatian waters, they are welcome, as also welcome are Shell, Exxon and all the other companies”, Milanovic said, adding that he would not allow Croatia to be drawn into the bickering between Washington and Moscow.

The announced amendment to the INA privatization also testifies that is difficult to avoid politics is the business of this type. According to the amendments to the law, which precisely the Prime Minister Milanovic has announced, the government will get the authority for approval during the purchase of INA shares if the interested company is not from some EU member states. It would specifically mean that the Croatian government could stop a possible sale of MOL’s stake in INA to the Russians.

That such a job also requires political will, understood in Gazprom too, so the first man of this company Alexei Miller should arrive in Zagreb on Wednesday, July 9th. Miller should meet with Croatian President Ivo Josipovic in the Presidential residence in Pantovcak, and besides oil and gas exploration in the Adriatic, it is likely INA’s to be the topic of conversation, namely the announced controversial changes to Law on the privatization of the Croatian energy company.

Due to political decisions and probably pressures from western countries Croatia lost an opportunity that the South Stream pipeline runs through it. Russia is interested again in investing in the Croatian energy sector through the possible purchase of INA shares and hydrocarbons excavation in the Adriatic. Given the tightened relations between Russia and the West, the energy business in Croatia, the bordering state of the Union to the southeast, certainly has a political dimension. But in Croatia, whose GDP has fallen for the fifth year in a row, the foreign investments and economic aspect of the story seem more important. In the case of positive resources findings in the Adriatic, it would have changed the economic and geopolitical positions, concludes our source Dekanic, but he warns that it is a long-term jobs, and that we should not expect quick results.

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