Croatia: Croatia's 3 Key Energy Industry Directives

Last Updated: 12 September 2016
Article by Igor Dakic

With so many changes taking place in the Croatian energy sector, many opportunities are opening up.

With so many changes taking place in the Croatian energy sector – and so many opportunities opening up – it is imperative that one stay informed, and on the right side of compliance, of course. 

1. Onshore instead of offshore

After much of the period between 2012 and 2015 was spent preparing for and promoting governmental tenders for the exploration of oil and gas in the Adriatic, the centre-right government of Croatian Prime Minister Tihomir Oreskovic put a stop to the idea immediately after coming into power in January 2016. The decision was made despite the fact that two licenses had already been awarded, one to the INA oil group—jointly owned by the Croatian state and Hungary's MOL—and one to Italy's ENI and MEDOILGAS. The main reason cited was potential negative impact of drilling on the country's lucrative tourism industry, even though calculations showed that the project could have had an enormous impact on Croatia's economy, increasing its GDP by as much as 3-4%.

Instead, attention was switched to on-shore exploration, and indeed in early June the Government signed contracts with one local firm and one Canadian company that had been awarded onshore oil and gas exploration blocks in the north and east of the country. Another concession was awarded to Nigeria's Oando Plc, and the exploration period in all instances will last five years and the concession for exploitation will be valid for 25 years in the case of a commercially viable discovery. It is on this occasion, as was reported in the main Croatian media, that the now acting Minister of the Economy Tomislav Panenic restated in very clear terms that 'onshore' is the way Croatia wishes to go, and that "there are no plans for oil exploration in the Adriatic".

However, extraordinary parliamentary elections are scheduled for Sunday September 11, so it remains to be seen if there will be any change in direction. All polls indicate that it will be a close one, but the governing impression is that, amid environmental and other tourism-industry related concerns, even if the Opposition come into power it is likely that they will not change the course taken by the present, now technical, Government.

2. Construction of an LNG terminal on the island of Krk

After twenty years since the idea first surfaced and a whole host of abortive attempts to build an LNG terminal on the northern island of Krk, Croatia finally 'might' have a floating LNG import terminal at Krk by 2018. This was stated in late May in Brussels by Mladen Antunovic, Managing Director of the State-run developer LNG Hrvatska, who also noted that his company is looking to sign an initial five-year charter with an option to extend that by five years. Antunovic also said that contacts with FSRU (floating storage and regasification unit) ship-owners have already been made, and that he hopes that the final investment decision "will be taken in early 2017." Following a non-binding season LNG Hrvatska intends to sign memos of understanding for binding commitments covering some 5bn m3/year to 2024, then 2bn m3/year from 2025-40.

The terminal is meant to serve the wider region, and together with seven other infrastructure projects across the Adriatic-Ionian and Danube Basin regions it should have the effect of driving down the price of Russian gas and reducing Europe's dependence on Moscow by shaving off the regional energy bill by as much as €1bn per annum.

Somewhat surprisingly, in July there emerged rumours that the Croatian Ministry of the Economy was thinking about removing the project from its list of strategic investment projects, which, oddly, happened after an apparent consensus on transit-related matters had been reached between the Croatian and Hungarian energy grids. However, the Croatian Minister of the Economy, Tomislav Panenic, was quick to dismiss this hearsay in a formal Government press release issued on 19 July "Claims...that I consider removing the project of LNG terminal from the list of strategic investment projects of the Republic of Croatia are false because the strategic interest of the Republic of Croatia, as well as of the European Union, is to finalise this project as soon as possible. Certain interest groups want to influence the realisation of the LNG terminal on the Island of Krk with these false claims".

In other words, this more than €1bn project is a go, and it only remains to be seen how quickly everything can be realised.

3. Creating a more consumer-friendly market

At a Government-sponsored June energy conference organised in Zagreb by Lider, the leading Croatian business weekly, there was indeed no shortage of insight into the transformative nature of the dominant trends in the global energy industry and the effects this will have not only on the key Croatian energy-sector players, but also on consumers. For instance, at last year's G7 event all the member states pledged to reduce Co2 emissions by as much 70% by 2050, which means that the order of the day is 'renewables' and that the role of the regulator will become even more important.

As far as distribution is concerned – both of gas and electricity – it was stressed that most massive state-owned utility companies are struggling with profitability, although that is not the case with the Croatian HEP, although it could be argued that this is on account of the still-monopolistic position of this company. One of HEP's main competitors, the German RWE, is calling for further liberalisation but also consolidation of the market, which are yet to take place. Consumers are still insufficiently well informed, which, if remedied, combined with timely and adequate investments in the distribution network, could potentially drive prices down but also increase the profitability of distributors. In other words, with good cooperation between all stakeholders, everybody wins.

Naturally, members of the academia in attendance couldn't underscore enough that we are in the middle of an epochal 'energy transition', which means implementing and installing the so called smart energy systems that would link both the needs and interests of centralised production outfits with consumers. The 'Danish' model was mentioned as the most desirable scenario, or a scenario in which an ever growing number of households aims to achieve energy self-sufficiency – mainly through the use of solar panels – which also means selling the produced surplus via the grid. It is also of interest to note that the southern island of Mljet is the first ever completely 'green' island (in the world), which means that Croatia is in a good position to truly take its energy policy (and practice) into the new millennium. There are also enormous opportunities in exploiting biomass, which is four times more efficient than, say, wind.

In the meantime, the Croatian Government's principle directive in the new Energy Strategy can be summed up by the so called 'mixed' approach, meaning that, in addition to the abovesaid, a number of investments in coal-fuelled plants are underway. By way of an example, Hiroshi Tachigami, the CEO of Marubeni Europower, has confirmed his company's dedication to investing €1bn in the Plomin C Thermal plant. Parallel to that, representatives of HEP have plans to invest some €400m Euro in hydro plants by 2023. In other words, there is no shortage of plans and activities, and the key thing for all investors is to do is proper risk assessment and to think long term. There indeed is plenty of opportunity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions