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ENERGY: Long Road to a Fully Functioning and Profitable LNG Terminal in Croatia


ENERGY: Long Road to a Fully Functioning and Profitable LNG Terminal in Croatia

6 March 2017, VG Intelligence Weekly Issue 44

After much public speculation, this past week, the Croatian Government announced that the price of gas for households will not increase. Concerns regarding the price hike arose following amendments to the Gas Market Act (GMA) that entered into force in late February and will become fully applicable on April 1 2017. The amendments were adopted as part of the EU’s third energy package and, most importantly, transposed the Directive 2009/73/EC concerning common rules for the internal natural gas markets in the EU. This Directive removes current gas import and export restrictions and enables the further opening of the Croatian gas market. Amendments to the GMA come on the heels of a €102 million grant from the European Union’s Connecting Europe Facility (CEF) fund for the construction of a liquefied natural gas (LNG) terminal on the northern Adriatic island of Krk. The Krk LNG project has been in the pipeline for over a decade and the EU’s co-financing decision is a big step forward. However, in order to bring to life a functioning floating terminal by late 2019 (as was announced by Energy Minister Slaven Dobrovic), the Croatian Government must face a series of other challenges, especially in terms of a sustainable gas transport infrastructure, capacity and tariffs, and natural gas supply in the context of the country’s energy future.

The driving force behind the EU’s support for an LNG option in northern Croatia is its continued effort towards energy supply security, diversification and independence from Russian gas sources. Croatia’s contribution to this story is just a piece of a web of pipelines that aim to criss-cross Europe, establishing alternative routes to Russian supplies. However, the integration of gas markets and the diversification of gas supplies requires putting in place the necessary transport infrastructure. This can be achieved by implementing key regional projects, including the LNG Krk terminal. A big segment of EU gas sustainability relies on improving interconnections between countries, especially bi-directional flows. Indeed, as part of the New European Transmission System project, Croatia’s gas transmission system operator Plinacro and Hungary’s FGSZ jointly operate Városföld–Slobodnica, a bi-directional high pressure natural gas pipeline. The pipeline however extends only to northern central Croatia and the Zlobin (near Krk terminal site)-Bosiljevo-Sisak-Kozarac-Slobodnica pipeline, which is meant to act as the main delivery gas pipeline from LNG Krk, is far from completion...

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