New government

On January 22 2016 non-partisan Prime Minister Tihomir Oreskovic formed a new right-wing government. Oreskovic is a businessman rather than a politician, and thus his nomination was unexpected.

As 2015 was an election year, almost all major projects – most of which had been initiated by the former left-wing government – were halted and related decisions postponed until after the elections. It remains to be seen which energy projects will be supported by the new government.

For example, the new prime minister recently named the Krk liquefied natural gas (LNG) terminal project as a top priority. However, the right-wing party had previously strongly opposed the Adriatic offshore exploration project. It remains to be seen how it will act now it is in power.

Krk liquefied natural gas terminal project

The call for equity for the Krk LNG terminal project has now ended (for further details please see "Call for equity for LNG terminal project"). The public call resulted in three offers from financial investors and seven from industrial investors. LNG Croatia LLC reported that all of the potential investors were world-class companies or funds with a strong background in the gas industry and financial businesses. It is now evaluating the offers and the preferred equity investors will be announced shortly.

Further, LNG Croatia announced an open-season procedure for parties interested in leasing terminal capacity (for further details please see "Second-quarter oil and gas update"). On October 31 2015 LNG Croatia announced that the process had been successful. The final step in the open-season procedure is ongoing and involves the preparation and signature of the LNG terminal service contract with the qualified LNG terminal users.

Finally, on September 10 2015 LNG Croatia received a valid location permit for the project. The European Union also confirmed that the LNG project was going well by including it in its list of 195 key energy infrastructure projects.(1) LNG Croatia will now have faster permit-granting procedures and easier access to EU funds.

Adriatic offshore exploration and exploitation

In January 2015 10 licences for the exploitation and exploration of hydrocarbons in the Adriatic Sea were granted. However, a production sharing agreement which was due to be signed in April 2015 remains unsigned. A consortium of Marathon Oil and OMV which had been granted licences for seven blocks withdrew from the agreement over unresolved border issues between Croatia and Montenegro. In its last session the former government revoked the licences for these seven blocks and held that the concessions for the remaining three blocks would be awarded after the election. Former Minister of Economy Ivan Vrdoljak also announced a new tender to take place after the election.

Onshore exploration

Although the government chose the preferred bidders for the first onshore licensing round for exploration and hydrocarbon production licences in northwest Slavonia in June 2015 (for further details please see "First oil and gas onshore tender"), and announced that the relevant production sharing agreements would be signed by the end of 2015, they remain unsigned. Three preferred bidders – Nigerian Orladno Plc, Croatian INA and Vermilion Zagreb – are still in the running and are awaiting the government's decision on the production sharing agreements. These are expected to be signed by new Minister of Economy Tomislav Panenic.

For further information on this topic please contact Miran Macešic or Ivana Manovelo at Macešic & Partners by telephone (+385 51 215 010) or email (mmacesic@macesic.hr or manovelo@macesic.hr). The Macešic & Partners website can be accessed at www.macesic.hr.

Endnotes

(1) EU Projects of Common Interest, November 18 2015.

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