Croatia has been seeking to open its Adriatic coast to the global LNG market for a number of years, with Brussels marking a scheme on the island of Krk as one of the key infrastructure developments needed to diversify supply in Central Europe.
The scheme would form the southern point of the North-South Gas Corridor initiative, supplying new options to a region mostly reliant on Russia for its gas – with Hungary and the wider Balkans able to offtake Croatian imports. Croatia already uses domestic sources to cover more than 60% of its demand.
Interfax spoke to Vladimir Durovic, director of strategic development for transmission system operator Plinacro, about the project – which he says will be heavily focused on regional as well as local market demand – on the sidelines of the Flame conference in Amsterdam last week.
Interfax: When is the LNG terminal expected to come onstream?
Vladimir Durovic: At the moment, it will be onstream at the end of 2019. A non-binding open season [for bids] finishes on 1 May and after that the project company will continue with several activities. The next step is the binding open season and now the project company is also preparing a business model.
The next step is FEED and an FID, which are expected in the middle of next year. That is the target because we want to finish the project on time. The location is still on the island of Krk; it’s a very good location as it practically penetrates into the middle of Europe. It’s close to market, which is very important too.
The capacity is 6 billion cubic metres per year [in accordance with] previous investigations. A comprehensive feasibility study was finished almost a year ago; a basic design is also complete and the next step is a detailed design. [The special purpose vehicle company] LNG Croatia announced a new tender for the FEED work a week or so ago. A lot of activities are now moving ahead. It will be a fixed terminal, not a floating one.
Interfax: The project has always been a priority within the context of the North-South Gas Corridor, but why has it taken so long?
VD: It’s a really big investment. The previous Adria LNG project [sponsored by E.On and OMV among others] was stopped because of the low price of gas and the market situation. They also had some problems with the environmental impact assessment procedure, but market reasons came first.
Poland [where a similar project is close to coming onstream] was in a specific situation. In Croatia and its neighbouring countries we are in a better position. We are connected to Baumgarten and we have our own production, and that is why the terminal is not necessary for Croatia alone.
The terminal is for the region. Especially with the [cancellation of] South Stream, the picture has completely changed.
Finally, we are waiting for results but there has been a lot of interest during the non-binding open season.
Croatia became a member of the EU just eighteen months ago and I think we are now in a better position with the project. The EU’s Connecting Europe Facility fund financed some preparatory work for the terminal and my colleagues working on the project are expecting more EU funding.
Interfax: What is the profile of the Croatian market and what challenges lie ahead for the EU’s newest member?
VD: Our market is open. We have some limits because we have households that are price-protected.
But three or four years ago, we only had one supplier in our market [state-owned INA]; now we have 17 active suppliers. The market has gone in a good direction.
Another key issue is that our market has decreased since 2008. There are several reasons for this – the financial crisis is one. In the past few years, hydro power [production] was very good and so the production of electricity was up. We expect that in the future our gas consumption will stabilise and go up a little – but not a lot.
Now we consume 3 bcm/y, but we will get to 3.5 bcm/y in the next 10 years. In Croatia, we have a very long history of gas production. We now produce 60% of our consumption. We know that there are some reserves in the Adriatic too and we have to use any possibility for security of supply.