The Krk liquefied natural gas (LNG) terminal project changed course when the government decided to construct a floating terminal with smaller capacity instead of the initially planned land-based terminal. The reason for this political decision was to make the terminal operationally faster and reduce costs, since it was clear that the deadlines for making the land-based terminal operation were unattainable and the project would be much more difficult to complete. The project documentation initially made for a land-based terminal will be amended accordingly and the respective permits for a floating terminal will be obtained.
Since the deadlines for building the terminal are short, LNG Croatia is simultaneously undertaking several activities in order to meet them, the most important of which are discussed below.
Investigation of Sepen Bay seabed
From August 16 until September 25 2017 a Croatian-based company investigated the seabed in the area where the floating terminal will likely be built. The investigation included seabed drilling and various geological tests to ascertain whether there were areas where it would be problematic to construct the jetty for the mooring of the floating storage and regasification unit vessel (FSRU), as well as the floating terminal itself. The results of the investigations – and accordingly the costs of building the jetty – should be published shortly.
The first session to assess the project's environmental impact was held on September 22 2017. The committee – comprised of members from the respective ministry, the Croatian tourism association, the Croatian Economic Chamber and the Omisalj municipality – raised objections based on insufficient information regarding:
- the potential effects on the surrounding environment, including with regard to cooling water temperatures and chlorine treatments of the water; and
- the visual impact of the terminal.
The study will be amended accordingly and the next session will be scheduled shorty. The next step in the procedure is to open the issue to public debate for at least 30 days.
The representatives from the Omisalj municipally strongly objected to the study, calling it "offensive" and stating that it lacked expertise and failed to consider crucial issues – for example, cost effectiveness, the impact on Njivice (a nearby tourist city) and the economic impact on the community.
Engineering, procurement and construction tenders
LNG Croatia recently invited the industry to submit requests to participate in:
"Procurement of works for the LNG Import Terminal on the Island of Krk based on a Floating Storage & Regasification Unit consisting of the design and construction of jetty, connecting gas pipeline and high-pressure installations including pigging station, water and drainage, auxiliary facilities and buildings."
According to LNG Croatia, it is looking for a contractor that can perform the project on a turn-key basis.
The deadline for submitting requests was October 6 2017.
Another invitation for the procurement of a FSRU vessel, together with maintenance services, was also announced.
One of the criterion to receive EU funds is that the terminal have its own FSRU vessel. Procurement of this specific vessel within the set timeframe could be challenging, considering that all FSRU vessels currently operating globally are in leasing or being leased. However, according to LNG Croatia Director Goran Franic, the company has found a solution, the details of which are unknown.
The deadline for submitting requests was September 29 2017, but was prolonged to October 6 2017.
According to Franic, all major decisions regarding the terminal should be reached by the first quarter of 2018, while the building permit for the floating terminal is expected in May 2018.
After the first round of engineering, procurement and construction and FSRU tenders is finished, LNG Croatia can request that the regulatory agency issue tariff prices for gas from the floating terminal.
Once the prices are set, LNG Croatia will announce the second binding tender for construction of the jetty and purchase of the FSRU vessel.
Pursuant to EU funding criteria, the floating terminal should be finished by 2019.
Although the project was granted EU funds amounting to €103 million (ie, 27% of the total value (€360 million) of the project) instead of the expected 50% of the total value, LNG Croatia is positive that all deadlines will be fulfilled and the terminal will be operational by 2019.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
For further information on this topic please contact Miran Macešic at Macešic & Partners by telephone (+385 51 215 010) or email ([email protected]). The Macešic & Partners website can be accessed at www.macesic.hr.
