The Croatian Restructuring and Sale Centre has announced a public invitation for expression of interest for the acquisition of shares in four partially state-owned companies: three hotel companies and a shipping company. The acquisitions are the result of the government's privatisation policies.
The second of three planned onshore licencing rounds for the exploration and production of hydrocarbons in Croatia is currently underway. Seven exploration blocks in southwest and central Croatia and central Slavonia have been offered in this bidding round. After the tender procedure has been completed and the most successful bidder has been selected, the Croatian government will issue a decision on awarding an onshore exploration and exploitation licence for each of the seven blocks.
The government recently adopted a number of amendments to the Act on Renewable Energy Sources and High-Efficiency Cogeneration. According to the government, the amendments aim to harmonise national law with the EU legal framework, introduce an integration process for eligible producers of renewable electricity and high-efficiency cogeneration on the electricity market and reduce the obligation on suppliers to purchase renewables at a regulated price that is higher than the market price.
As part of its goals, the Act on Amendments to the Gas Market Act sets out a new gas market model. Under the new gas model, on receiving a proposal from the ministry and following approval from the Gas Regulatory Agency, the government will set the maximum price for gas, according to which the wholesale supplier must sell gas to retail suppliers for households. It remains to be seen how this new gas market model will affect consumers, the economy and the overall gas market.
The relationship between INA (the national oil and gas company) and MOL (Hungarian Oil and Gas Plc) goes back to 2003, when INA was privatised through a public procurement process. However, the Croatian government and MOL are in two international disputes over INA. Following a recent decision, the prime minister announced that the government will initiate the process to buy-out MOL's shares in INA.
Recent initiatives in the Croatian energy sector include the construction of the largest solar-powered irrigation system in Europe, which is already proving to be an ideal solution to water management in agriculture. Further, the government recently announced its plan to increase the renewable energy sources incentive fee. As a countermeasure, the government lowered the value added tax rate for electricity supply from 25% to 13%.
Participating countries at the recent Dubrovnik forum signed the Statement on the Three Seas Initiative, with the aim of connecting the north-south gas corridor, reviving cooperation between Adriatic, Baltic and Black Sea countries and unifying the European energy market. One of the initiative's key projects is the liquefied natural gas terminal on Krk Island in Croatia, which will be the backbone of the new gas corridor to the Baltics.
Key decisions affecting the Croatian energy sector were rendered in a recent government session, including the expedition of the first of four phases of the floating liquefied natural gas terminal on the island of Krk, and the approval of production-sharing agreements for the exploration and exploitation of hydrocarbons for six onshore blocks in northwest Slavonia. The decisions were issued during one of Croatia's most turbulent political periods.
The Renewable Energy and High Efficient Cogeneration Act recently came into force, replacing a confusing and complicated legal framework which was discouraging to investors. The act is a huge step forward for renewable energy projects in Croatia. In addition, Croatia is implementing its EU objectives successfully and is following the global trend of switching to a clean energy economy.
In January 2016 non-partisan Prime Minister Tihomir Oreskovic formed a new right-wing government. 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.
The Krk liquefied natural gas (LNG) terminal project is progressing well. The project foresees the construction of an LNG terminal for the receipt, storage and regasification of liquefied natural gas on the island of Krk, with a nominal annual capacity of 6 billion cubic metres. In the latest development, future operator LNG Croatia Ltd recently announced a call for equity, hoping to attract potential industrial and pure equity investors to the project.
Following public debate, the Ministry of Economy has issued a revised report evaluating the environmental impact of offshore exploration and hydrocarbon production. In addition, the government has chosen preferred bidders for onshore oil and gas exploration bids and LNG Croatia has announced another tender for consultancy for the liquefied natural gas terminal on the island of Krk.
The government has granted 10 licences for the exploitation and exploration of hydrocarbons in the Adriatic Sea. Meanwhile, the Ministry of Economy has opened a public debate on the strategic environmental impact of the exploration and production of hydrocarbons in the Adriatic, and the first onshore licensing round for the exploration and exploitation of hydrocarbons has closed.
LNG Croatia has announced an international tender for business, financial and legal advisers for the construction preparations of a liquefied natural gas terminal on the island of Krk. Among other things, project advisers will be expected to advise on business and legal model preparation and drafting terminal capacities utilisation contracts. Each adviser must have relevant expertise and key personnel must be available.
Despite much debate and opposition, the construction of a 500-megawatt-capacity coal-fired power plant – the Plomin C project – is finally moving forward. The project has been awarded strategic investment project status by the government. The Croatian Electric Utility Company has announced an invitation for expressions of interest for participation in the construction project for the Kosinj/Senj hydropower plant.
The government has launched the first onshore licensing round for exploration and hydrocarbon production licences. The offshore licence round comprises approximately 15,000 square kilometres divided into six blocks located in the continental regions of Podravina and Slavonija. Meanwhile, the government has simultaneously prepared tender documentation for the first onshore licencing round for northeastern Croatia.
On April 2 2014 the long-awaited first offshore licensing round for the exploration and production of hydrocarbons in the Adriatic Sea was opened. The bid round closing date is 14:00 on November 3 2014. The offshore licensing round comprises approximately 36,823 square kilometres divided into 29 blocks of between 1,000 and 1,600 square kilometres each.
The government recently announced that a tender is scheduled for April 2014 in which 29 blocks in the Adriatic will be offered for the exploration and exploitation of oil and gas. Allegedly, more than 30 oil and gas companies have already expressed their interest in the tender. Meanwhile, the Strategic Investments Act has also been introduced, to give preferential treatment to investment projects of national interest.
Steps were recently taken to resolve a lengthy dispute between the government and MOL (Hungarian Oil and Gas Plc) over INA (the national oil and gas company). A recently announced public tender for consultants for the dispute resolution negotiations between INA shareholders, the government and MOL suggests that the government expects the negotiations – which will ultimately decide INA's destiny – to be lengthy and complex.
The Hydrocarbons Exploration and Exploitation Act recently became effective. With the passing of the act the required legal framework for hydrocarbon exploration and exploitation, which also includes the Mining Act and the Concession Act, is now complete. Through the new act the state is seeking investors and potential partners to invest in hydrocarbon exploration both onshore and offshore in the Adriatic.
Developments in the electricity and gas legislation signal the further opening up of the Croatian market to potential domestic and foreign investors. As part of the process of incorporating the EU Third Energy Package into Croatian law, the new Energy Act was passed in late 2012. The umbrella Energy Act regulates the energy market in general, while separate acts regulate the gas, oil, electricity, heat and renewables markets.
With the sale of most of the shares in Croatia's national oil and gas company to its Hungarian counterpart in 2006 and the passage of the new Energy Act, the government has lost control of the gas market. In response to this changing landscape, Croatia's strategic plan for the national gas market is based on two goals: ensuring a free market and developing a network that would facilitate this.
One of Croatia's obligations as part of its forthcoming accession to the European Union is the incorporation of the EU Third Energy Package. To this end, Parliament has passed the Energy Act, which regulates security of supply and sustainability, generation and consumption, policy and planning, energy market and public service energy activities, and general principles of energy activity.
The exploration and exploitation of oil and gas in Croatia, performed in accordance with the legal framework in force, has faced several difficulties. Consequently, the Ministry of Economy is eager to pass a new act which would facilitate the tendering process. Other developments in this sector include progress of the Plomin C tender and the discovery of new oil reserves in northeast Croatia.
The Croatian natural gas market comprises 3 billion cubic metres of transmitted gas, of which 65% comes from domestic production and 35% is imported. Following a report of the Energy Community Regulatory Board which identified various natural gas market shortcomings in Croatia, the government has sought to remedy these problems through various means.
At the end of 2010 the government approved 18 investment projects in the energy sector, worth a total of €3.85 billion. Key projects include the construction of the Ombla underground hydroelectric power plant near Dubrovnik, worth €130 million, and the Plomin 3 coal-based thermal power plant in Istria, worth €800 million. It is expected that public tenders for both will attract a number of domestic and international investors.
Following an offer by MOL to purchase the shares owned by the small stockholders of INA (the national oil and gas company), the Croatian Financial Services Supervisory Agency suspended trading of INA's stocks on the Zagreb Stock Exchange. The offer was seen as a hostile takeover attempt against INA as MOL failed to notify the government of its offer.
Gas operator Plinacro is due to announce an international tender for potential investors for a floating liquefied natural gas project, worth approximately €50 million. The project is a temporary solution designed to meet local market needs while an investment decision is awaited on the land-based terminal. The project has an expected capacity of six billion cubic metres of gas.
As part of its measures to combat the recession and aid economic recovery, the government has approved 18 investment projects in the energy sector, worth a total of €3.85 billion. The projects will be implemented by state-owned companies and local authorities, including Croatian national electricity company HEP, gas transmission system operator Plinacro and oil pipeline system manger JANAF.
Gas operator Plinacro is soon to announce an international tender for the preparation of a feasibility study on the Croatian route of the South Stream pipeline. Earlier this year Croatia signed a cooperation agreement with the Russian government on the construction and operation of the pipeline in Croatian territory.