New Croatian Government to Stop Oil Exploration in the Adriatic Sea

Total Croatia News

The end of the road for oil and gas drilling in the Adriatic? 

For a government which has stated that improving investment climate is one of its main goals, it seems strange that the first move in the Economy Ministry could actually be to stop potential investments. The introduction of a moratorium on the current project of exploration and exploitation of hydrocarbons in ​​the Adriatic Sea will immediately stop investments worth at least 300 million euros in three exploration areas for which an international tender resulted in offers by investors, reports Jutarnji List on January 23, 2016.

These investors, particularly Italy’s ENI, will probably raise the issue of the investment climate in a country where the change of government brings about the suspension of investment processes which had previously been developed for years. Since the new government expects a lot from investment projects in the energy sector, and most of these cannot be implemented in four years, it is expected that this decision will negatively affect the attractiveness of all future government projects among potential investors who will ask themselves whether their project would survive a possible another change of government.

In general, the published government guidelines present a radically green vision for energy sector, including a temporary moratorium on the construction of thermal power plants in Croatia (it is not clear whether this includes biomass power plants). The guidelines also envision an increase in renewable energy and, perhaps most importantly, breaking up of the state electricity company HEP, with a complete ownership separation of regulated activities and the distribution infrastructure. Is this a prelude to possible privatization of the rest of the HEP, or a part of a broader plan for the extraction of some of the current state energy companies from the authority of the Economy Ministry, which is under MOST control, into the ministry devoted to infrastructure which is controlled by HDZ?

Finally, perhaps the most important issues are those which are not even mentioned. There is not one word in the guidelines about the fate of INA and its unresolved relationship with Hungarian company MOL, although INA is a company which represents more than 50 percent of the Croatian energy sector. This issue will gain additional importance if the appointments for other posts in the ministry include people who were actively engaged in the process of concluding the disputed contract with the Hungarian company.

Economy Ministry will be one of the key sectors in the new government because, in addition to energy projects, it will be responsible for the implementation of other two government priorities – reduction of fiscal charges for companies and improving the “Doing Business” indicators.


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