Government Approves Financings for First Stage of LNG Terminal

Total Croatia News

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ZAGREB, January 30, 2019 – Environment Protection and Energy Minister Tomislav Ćorić on Wednesday told a press conference that the operating costs of the LNG terminal on the island of Krk would be covered from an existing lease and security of supply fees (S.O.S fees).

Questioned by reporters following a cabinet meeting at which a decision was adopted on financing the first stage of a floating terminal project, whether there were any figures of the LNG terminal’s business over the next 10 to 15 years, Ćorić said that he expects the terminal’s operating costs to be settled from an existing lease and S.O.S. fees which will primarily depend on how negotiations between the terminal’s owner – LNG Croatia – and potential future lessees would end.

“In that context, talks will continue over the next few weeks and months on that topic between our side and the Hungarian side, given the letters of intent that we received in the last phase of binding bids for the terminal’s leasing. We believe that for that reason the S.O.S fee as of 1 January 2021 will have a minimum, if at all, effect on the price of gas in Croatia,” Ćorić said.

If the terminal’s lease remains at the current 520 million cubic metres of gas, the S.O.S fee will impact the price of gas by one percentage point compared to the current market price of gas, which means an amount of about 35 kuna a year for a household with an average consumption, he added.

“We firmly believe that in the coming weeks and months more LNG gas will be leased and in that context the share of the S.O.S. fee will decrease over the next two years remaining before the terminal starts operating, said Ćorić.

He noted that since the start of this year, Plinacro’s fee for gas transmission through Croatia was reduced by 20 percentage points and that the total burden of the S.O.S fee, which should be operational as of 1 January 2021, for example on the price of gas in December of the previous year, will amount to about 0.1%.

Reporters asked Ćorić about communication with the local community given the protests against the construction of a floating terminal.

To the residents of Omišalj and Krk who are concerned about the ecological aspect and the age of the LNG conversion tanker, he said the age of the ship could definitely not be a problem and that sea water would not be used on the regasification ship, so chlorine would not be released into the sea.

He added that the LNG terminal on Krk island would in no way endanger the environment and that it would bring the local community financial benefits.

“The capacity of the LNG terminal on Krk island, 2.6 billion cubic metres, is actually the capacity of Croatia’s total annual consumption. This project isn’t necessary only to Croatia. It also enables the surrounding countries to diversify their supply routes and make gas procurement for their markets safe.”

As for making the project commercial, Ćorić said the government believed in a positive outcome of talks with potential partners.

Event with the current 520 million reserved cubic metres, the financial construction for both investors is financially justified and brings, along with the introduction of the security of supply fee, a very acceptable contribution rate for both investors — HEP and Plinacro.

Asked about the influence of TurkStream, which targets the markets of Hungary and Austria, on the business activities of the terminal on the Krk island, Ćorić said that the prices of gas from the LNG terminal were not 30% higher than the prices of gas from classic gas pipelines, as suggested by a reporter.

The minister warned that Qatar was leaving OPEC precisely because it had decided to increase the production of LNG gas and the presence on the global market, adding that the production in the United States has been growing by the day. The minister also said that the price of LNG gas would correspond to the price of natural gas.

More news on Croatia’s LNG terminal can be found in the Business section.


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