The Hydrocarbons Exploration and Exploitation Act recently became effective. With the passing of the act the required legal framework for hydrocarbon exploration and exploitation, which also includes the Mining Act and the Concession Act, is now complete. Through the new act the state is seeking investors and potential partners to invest in hydrocarbon exploration both onshore and offshore in the Adriatic.
Developments in the electricity and gas legislation signal the further opening up of the Croatian market to potential domestic and foreign investors. As part of the process of incorporating the EU Third Energy Package into Croatian law, the new Energy Act was passed in late 2012. The umbrella Energy Act regulates the energy market in general, while separate acts regulate the gas, oil, electricity, heat and renewables markets.
With the sale of most of the shares in Croatia's national oil and gas company to its Hungarian counterpart in 2006 and the passage of the new Energy Act, the government has lost control of the gas market. In response to this changing landscape, Croatia's strategic plan for the national gas market is based on two goals: ensuring a free market and developing a network that would facilitate this.
One of Croatia's obligations as part of its forthcoming accession to the European Union is the incorporation of the EU Third Energy Package. To this end, Parliament has passed the Energy Act, which regulates security of supply and sustainability, generation and consumption, policy and planning, energy market and public service energy activities, and general principles of energy activity.
The exploration and exploitation of oil and gas in Croatia, performed in accordance with the legal framework in force, has faced several difficulties. Consequently, the Ministry of Economy is eager to pass a new act which would facilitate the tendering process. Other developments in this sector include progress of the Plomin C tender and the discovery of new oil reserves in northeast Croatia.
In April 2012 the Croatian government increased the tariff rates for all customer categories and announced that prices will continue to rise until they meet the EU average. Meanwhile, in order to achieve security of electricity supply, the government is planning a number of projects, including investments in existing facilities and several new hydropower plants.
Following a tender announced in October 2011, Prirodni Plin doo has begun the exploration of possible storage capabilities on the Grubiško polje field. The company has also invested in two additional wells, expected to commence operation later this year, which will add an additional 20,000 to 45,000 cubic metres an hour to the current extraction capacity of the Okoli storage facility.
A tender for exploration permits in 14 areas in northern Croatia has been annulled by the new government because the tender terms did not ensure free competition and allow all potential bidders to make serious bids. Meanwhile, the new mining regulations, which have been harmonised with EU law, will open up national oil and gas natural reserves to all interested parties for exploration and exploitation.
As Croatia is due to become a full EU member in 2013, in order to harmonise the national energy legislation with EU requirements, Parliament has passed two acts and five implementing regulations, which together make up the renewable energy legal framework. The use of alternative energy sources is one of the strategic plans outlined in the Energy Development Strategy from 2009 to 2020.
Recent amendments to the Mining Act 2009 are designed to fill the gaps in the mining legal framework that was brought into effect by the act. Among other things, they provide that owners of property damaged due to exploitation and/or exploration by natural persons and legal entities that do not hold the required permits can claim compensation. The Mining Act is designed to give control over mineral reserves back to the state.
The Croatian natural gas market comprises 3 billion cubic metres of transmitted gas, of which 65% comes from domestic production and 35% is imported. Following a report of the Energy Community Regulatory Board which identified various natural gas market shortcomings in Croatia, the government has sought to remedy these problems through various means.
At the end of 2010 the government approved 18 investment projects in the energy sector, worth a total of €3.85 billion. Key projects include the construction of the Ombla underground hydroelectric power plant near Dubrovnik, worth €130 million, and the Plomin 3 coal-based thermal power plant in Istria, worth €800 million. It is expected that public tenders for both will attract a number of domestic and international investors.
Following an offer by MOL to purchase the shares owned by the small stockholders of INA (the national oil and gas company), the Croatian Financial Services Supervisory Agency suspended trading of INA's stocks on the Zagreb Stock Exchange. The offer was seen as a hostile takeover attempt against INA as MOL failed to notify the government of its offer.
Gas operator Plinacro is due to announce an international tender for potential investors for a floating liquefied natural gas project, worth approximately €50 million. The project is a temporary solution designed to meet local market needs while an investment decision is awaited on the land-based terminal. The project has an expected capacity of six billion cubic metres of gas.
As part of its measures to combat the recession and aid economic recovery, the government has approved 18 investment projects in the energy sector, worth a total of €3.85 billion. The projects will be implemented by state-owned companies and local authorities, including Croatian national electricity company HEP, gas transmission system operator Plinacro and oil pipeline system manger JANAF.
Gas operator Plinacro is soon to announce an international tender for the preparation of a feasibility study on the Croatian route of the South Stream pipeline. Earlier this year Croatia signed a cooperation agreement with the Russian government on the construction and operation of the pipeline in Croatian territory.