Regulation A Stumbling Block As Majors Take Notice Of Adriatic Potential

Future EU member Croatia is reportedly in talks with ExxonMobil , ConocoPhillips and General Electric regarding potential oil and gas exploration targeting the Adriatic Sea. Although Croatia does produce both oil and gas, output falls short of demand , leaving the country a net importer. Exploration in the Adriatic could unlock new sources of supply that would benefit both Croatia and its neighbours , wh ich are eager to reduce their reliance on imports from Russia.

Tapping new supplies is becoming more important as current gas output is set to peak around 3bn cubic meters (bcm) in 2013/14 . O fficials are currently considering the construction of floating liquefied natural gas ( F LNG) import terminal to meet demand , but the high co sts of imported gas could be problematic given that Croatia's impor t bill is also set to rise as a result of increased oil imports .

Output Lagging Demand In Gas...
Croatia's Natural Gas Production And Consumption (bcm)
...And In Oil
Croatia's Oil Production And Consumption ('000b/d)

However , the absence of a clear regulatory framework is holding back interest Croatia's in offshore potential. Current exploration and production (E&P) is dominated by the INA Industrija and governed by an outdate d Mining Act , which fails to make specific provisions for oil and gas. Investor interest has been hurt by a lack of clarity and blocks offered for exploration in December 2011 were rescinded , as the tendering process was contested by bidders , who suggested it was insufficient to promote competition. The 30-day submission period, a failure to provide bidders with pertinent documentation and terms that were deemed unrealistic all provoked complains from interested parties.

O fficials from the economy ministry are eager for the passage of a new hydrocarbons law, expected by June 2013, which could pave the way for new investment . H owever , there is still a risk of interference from those who view the current monopoly on production as satisfactory.

If ExxonMobil and ConocoPhillips acquire acreage in the country, this would help to reduce risk in the market , and the region , which remains underexplored. Noble Energy , which has had success with prolific gas discoverers in southern Mediterranean waters near Israel and Cyprus, has previously also expressed an interest in Croatia.

Meanwhile, Croatia's entry to the EU should help to reduce some , but not all , of the regulatory risks that have stalled E&P previously. Already a proven producer, Croatia's slice of the Adriatic could become a new hotspot for investment if the business environment proves supportive.

This article is tagged to:
Sector: Oil & Gas
Geography: Croatia

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