At the end of 2017, the EU announced the signing of a grant agreement in which it will be contributing €101.4mn into the construction of Croatia’s Krk LNG terminal, which is more than a quarter of the overall cost of the project. The advancement of this terminal will prove positive for the region as it will increase the security of gas supply to central and south-eastern Europe.
With the CEE Gas Conference coming up in March, Gastech Insights spoke with Executive Advisory Board Member and CEO of LNG Croatia, Goran Francic, to learn more about their project and what developments we can expect to see this year.
Gastech Insights: You are leading the planned floating LNG terminal in Croatia which has been in the process of being developed for over a decade now. Could you give us an update on the pending project?
Goran Francic: The project has indeed been in the development for over a decade. Faced with declining gas consumption and the high cost of land-based terminals on the one hand and the necessity to heavily invest in new pipeline infrastructure on the other, the numbers to justify FID for a land-based terminal were just not present.
However, with the emergence of FSRU (Floating, Storage and Regasification Unit) technology, the dynamics have changed and the Croatian Government decided to develop the project in two phases:
We are certain that the FID for the FSRU phase of Krk LNG terminal will be reached in the first half of 2018, with the tenders for the FSRU procurement and EPC for jetty construction progressing well. In December, we launched binding Open Season for long-term LNG capacity booking.
Gastech Insights: How will the development of LNG affect the gas market in Central and Eastern Europe, particularly security of supply?
Goran Francic: Central and Eastern European gas market are now captive to the single supplier. Put simply, the gas from the LNG terminal will change that enabling competition between LNG producers around the world to compete with piped gas. Such diversification will put downward pressure on the price of gas and at the same time substantially increase the security of regional gas supply.
Gastech Insights: With more infrastructure being built in the region, do you think gas prices could drop?
Goran Francic: Intensified gas E&P efforts, new infrastructure bringing Caspian gas to the region and new LNG infrastructure on both sides of LNG chain will increase supply and the prices should drop. Due to the rather high marginal cost of new infrastructure, the drop could be mild, even though the incumbents will probably vigorously defend their market share.
Gastech Insights: What can attendees of the CEE Gas Conference expect to take away in March 2018?
Goran Francic: Until February Croatia will adopt the new gas law bringing national gas legislature into full alignment with EU energy jurisprudence. The LNG terminal will be in advanced permitting phase with binding open season concluded. This means that 2018 will be an exciting year for the gas sector and we look forward to discussing the developments.
Share your insights and join the conversation: What are the greatest opportunities the LNG terminal could bring to Croatia as well as the region? Leave your comment below.
Image courtesy of LNG Croatia
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