"Croatia Oil & Gas Report Q3 2016" Published

Croatia announced an indefinite delay to offshore oil exploration, a move which reinforces the already bearish outlook for reserves and production. A delay in the signing of contracts for onshore exploration, which the government has said it continues to support, further underscore s the regulatory uncertainty facing upstream investors. The outlook for a proposed liquefied natural gas ( LNG ) terminal remains positive ; a decision on it is likely in 2016.

The main trends and developments in Croatia's oil and gas sector are:

Oil and gas agency CHA announced in April an indefinite delay to the award of outstanding offshore blocks. The decision highlights political and environmental opposition to offshore oil and gas exploration in the Adriatic. The prospects for offshore drilling in the near term are remote and the moratorium will weigh on the long-term outlook for liquids reserves and production.

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The government has signalled it could support offshore exploration for gas, though a lack of regulatory clarity remains a concern. Bidders in Croatia's only offshore drilling round in 2015 also indicated a preference for gas- rather than oil-prone acreage, suggesting it may be more difficult to attract investment with a ban on exploration for liquids offshore.

Croatian officials have indicated strong backing for a LNG at Krk, with a final investment decision on the project possible at some point in 2016. We have included the terminal in our forecasts given support from both Croatia and the EU, though we note reports from April suggest the a floating LNG rather than onshore plant as initially thought may be developed.

The government has signalled it wants to revive negotiations with Hungarian energy group MOL on Croatian oil and gas company INA. Tensions between the government and MOL have led to uncertainty over the future of Croatia's two refineries. No talks have been held for two years and the government had, as of April, yet to appoint a team to lead the discussions, though an easing of tensions between the two parties could provide clarity as to the long-term outlook for Croatia's downstream sector.

Weak economic growth continues to constrain demand for refined fuels even as demand in the other markets in the region rises. The long-term prospects for the consumption of refined fuels remains weak given the economy and small size of the local market.

The Croatia Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Croatia including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.

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