Boston, MA -- (SBWIRE) -- 08/01/2012 -- BMI View: Uncertainty over LNG hangs over the Croatian energy sector, with a decision over a proposed Adriatic hub still months 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.

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 3.0bn cubic metres (bcm) in 2013/14. Consumption is forecast to rise from an estimated 3.0bcm in 2011 to 4.4bcm by 2016, then to 5.4bcm by 2021, requiring end-period annual imports of up to 3.4bcm.
- Russian company Zarubezhneft plans to invest more than EUR1bn in Croatia's oil infrastructure, daily newspaper Jutarnji List reported in January 2012. It may be interested in buying 63 Croatian service stations that Austria's OMV has offered for sale, representing a 13% market share, although Russia's Gazprom Neft is another potential purchaser.
- 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.
- The gas price for Croatian households rose 22% in May 2012, with electricity prices up by 20%, as a result of a government decision taken in late April. Industry, schools and hospitals will not face the same level of increases. Croatia imports 40% of the electricity it consumes. The power and gas price hikes will cover losses made by partly state-owned INA in the gas segment and enable state power supplier HEP to break-even by the end of 2012.
- 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 22,900 barrels per day (b/d) to no more than 21,100b/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 108,200b/d by 2016. Imports are therefore set to rise to 87,100b/d by 2016.
- The estimated cost of crude oil imports during 2012 is US$3.23bn, based on an assumed OPEC basket oil price of US$111.47 per barrel (bbl). By 2016, the oil import bill is put at US$3.15bn. Croatia is also importing higher volumes of gas, and the combined cost of both fuels is forecast to be US$4.10bn by 2016.

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