BMI View: Uncertainty over LNG hangs over the Croatian energy sector, with a decision over a proposed Adriatic hub still more than a year away, while a floating LNG scheme has yet to find full support. Croatia’s limited domestic upstream prospects leave it increasingly exposed to oil and gas imports.

Croatia Oil and Gas Market Report Q1 2012

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The main trends and developments we highlight for Croatia’s Oil and Gas sector are: Gas from the Adriatic and onshore fields should deliver useful domestic volumes over the next few years. We believe output will peak at around 3bn cubic metres (bcm) in 2013/14. Consumption is forecast to rise from an estimated 3.0bcm in 2011 to 4.5bcm by 2016, requiring imports of 2.0bcm.

Between H211 and H112 national gas group Plinacro expects to complete two major pipeline projects. The first scheme will extend the national gas grid to the southern regions of Lika and Dalmatia, allowing industrial customers in that part of the country to switch from coal- and oil-based power sources. The second is a 6.5bcm interconnector to Hungary.

Croatia may seek new partners in its project to construct the Adriatic LNG terminal, as the government is keen to speed up the construction project, which it sees as key to the diversification of its LNG supply routes. The current partners have, however, pushed back the final investment decision (FID) on the build, from 2011 to 2013.

There is little immediate prospect of major oil accumulations being discovered and developed, so we expect to see a steady decline in crude and liquids production from the estimated 2011 figure of 19,100 barrels per day (b/d) to no more than 17,300b/d by 2016. Consumption of oil is set to rise more slowly than underlying economic growth – less than 1.5% per annum over the forecast period and reaching an estimated 105,000b/d by 2016. Imports are therefore set to rise to 87,500b/d by the end of the forecast period.

The estimated cost of crude oil imports during 2011 is US$2.9bn. By 2016, the import bill is put at US$3.0bn. Croatia is importing higher volumes of crude and gas, the combined cost of which is forecast to be US$3.9bn by 2016.

At time of writing, we assume an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.40/bbl in 2012. Global GDP in 2011 is forecast at 3.2%, down from 4.3% in 2010, reflecting slowing growth in China, a faltering recovery in the US and a worsening eurozone debt crisis. For 2012, growth is put at 3.6%.