Croatia’s LNG terminal plan could still run into problems

ZAGREB – A planned Croatian liquefied natural gas terminal may flounder as international partners dispute the veto powers of local firms in the consortium, a source close to the project said yesterday. Zagreb is preparing to build the LNG terminal, planned to receive the first tankers in 2012, in the northern Adriatic. A consortium was formed of three local and five European firms. The source, who is close to the energy industry and spoke on condition of anonymity, said a memorandum of understanding was to be signed between the partners before actual construction starts in 2008. However, the source confirmed reports that foreign partners were not happy with the idea that their Croatian counterparts with 25 percent ownership should have a veto right over the decisions of the consortium. «It effectively violates a previously agreed voting mechanism, which envisages a 61 percent majority decisions,» the source said. «By the end of March, it should be clear if the plan will remain on its original schedule,» the source said. The Croatian shareholders are state oil concern INA, 25 percent-owned by Hungary’s MOL, state-owned power board HEP and gas company Plinacro. Foreign partners are Austria’s OMV, French oil company Total, German utility RWE’s subsidiary Transgas, Slovenia’s gas company Geoplin and another German energy giant, E.ON-Ruhrgas. Croatia’s Economy Ministry, which coordinates Croatian members of the consortium, did not want to go into detail but said they expected the signing soon. «We have already agreed on all but two issues. I hope we’ll overcome those two as well in the coming weeks,» Zeljko Tomsic, the ministry’s top energy official, said. Concerns The source said Croatia would seriously damage its image in the eyes of investors if it continued to insist on the 25 percent veto right. «The partners are serious and big companies, and any delay would be mostly unwelcome and could make them seek alternative solutions,» the source said. Croatia’s LNG terminal is planned with a capacity of around 10 billion cubic meters (bcm) of gas per year. For comparison, Austria consumes between 8 and 8.5 bcm annually. LNG, cooled to liquid state for easy transport by tankers, is meant to make up for supply gaps in the fast-growing natural gas market in Europe. On arrival at a terminal, it is reheated and pumped into local pipeline systems. The island of Krk is the favored location for the terminal, although some local ecology groups have voiced concern about environment protection and potential damage to Croatia’s tourism industry. «The government’s commission is working on the choice of the location,» Tomsic said. Croatia’s efforts in recent years to push through major energy projects supplying West European markets have been mostly unsuccessful. Due to environmental concerns, Croatia virtually scrapped an oil pipeline project, the Druzhba-Adria, that would have connected Russian oil fields with the Adriatic. An agreement on implementing another oil pipeline project connecting the Romanian Black Sea coast with Trieste in Italy, crossing Serbia, Croatia and Slovenia, has also been delayed amid environmental concerns in neighboring Slovenia.