LNG Croatia – to be or not to be?

15. December, 2016 News No comments
article-image

According to the latest Annual report (World Energy Outlook 2016) published by International Energy Agency few days ago, rise in global energy demand for 30% is expected to happen up to 2040. However, it seems that gradual changes are about to happen in the share of a modern fuels in global energy mix. Although fossil fuels demand is expected to decline in a coming decades, slope of its’ increase in global energy mix is somewhat smaller than that from renewable and nuclear energy sources. Among all fossil fuels, natural gas is by far the best option when it comes to meeting the goals from Paris Agreement. In comparison to oil and coal, natural gas emits significantly lower amounts of CO2 when burning, therefore being more ecologically acceptable. Therefore, only natural gas sees an increase in consumption relative to today’s needs.

123

Figure 1: Position of planned LNG regasification unit on Island of Krk (www.google.hr)

Implications stated in a previous paragraph show free space for development of new projects related to natural gas. One of them is a broader development of worldwide LNG (Liquefied Natural Gas) projects. LNG terminals, either liquefaction or regasification, unlock the access to more remote sources of natural gas, being independent on existing pipeline grid and geopolitical issues associated

to it. Although European energy demand is expected to decline due to energy efficiency measures, the level of gas demand is likely to remain coupled to the economic activity. To ensure future security of gas supply, the European Union should definitely improve infrastructure, include new supply routes and LNG terminals to diversify dependence on a few suppliers.

Construction of LNG terminal, specifically regasification unit, in Croatia is not a new story. What is more, it has been a subject of many debates for a few decades. Position of the planned on-shore LNG terminal was Cape Zaglav on the Island of Krk in the Adriatic Sea with 6 bcm/y capacity. Geographical position of the planned terminal is promising because of specific position of Croatia on the European map, allowing supply for both south-eastern and central Europe. Sea depths at the location of the terminal allow docking of all LNG transportation vessels. One specific feature of the Adriatic Sea is that it penetrates in the hearth of Europe, therefore positioning itself among the fast and secure supply hub of goods for European countries (Figure 1).

12

Figure 2: Animated view on planned on-shore LNG regasification unit in Croatia (www.zavod.pgz.hr)

After the property and legal issues, without clear defining of financial model and strategic partners, Croatian government made a decision on construction of the on-shore terminal. In the same time, debate on much cheaper, faster and adoptable solution came up, as to be floating regasification terminal for LNG (Floating Storage Regasification Unit). The time of construction was reported to be much smaller, less time consuming, option to be cheaper and adoptable to market needs in terms of additional capacity installation. Another problem was to convince investors in profitability of the project since the gas consumption was continuously declining, both in Europe and Croatia, due to new technical advancements and energy efficiency measures. Today, new tender on preparing project documentation and special license issuing has finished, all of that for FSRU unit.

The importance of the construction of the LNG terminal in Croatia is in security of supply of Croatia and Europe, diversification of European supply corridors, connection with LNG terminal in Swinoujscie in Poland forming energy corridor north-south and strengthening Croatian energy position in the European natural gas market.

Direction of project development is known. Government brought a decision on construction of off-shore storage and regasification unit with the primary stage capacity of approximately 2 bcm/y which would satisfy Croatian gas demand and possible export capacities. Remaining questions rise up as who will be investors in the project, which markets will be supplied with this gas and from which locations and under which contracts. Croatia and Europe would definitely benefit from the construction of LNG terminal in Croatia but it is now the question of time when it will be realized since major number of regasification units in Europe are currently operating significantly under capacity. Hopefully, project will not only be actualized in situations of gas crisis in Europe as it was the case so far.

References:

1) World Energy Outlook 2016: Executive Summary; International Energy Agency, 2016

2) Adria LNG, 2008: Liquefied Natural Gas, Informative Brochure, Zagreb, Croatia

3) Gas Infrastructure Europe (www.gie.eu), April 2015

4) Long Term Outlook for Gas to 2035, Eurogas Brochure (www.eurogas.org)

5) D. Pavlovic, M. Jovicic: Projekt koji će učvrstiti geoenergetski položaj Hrvatske, EGE 1/2016, Energetika Marketing d.o.o. Zagreb, Croatia

by Ivan Bosnjak

About author