The Croatian Gas Association’s traditional Gas Day held on 13 October 2022 in the Almeria Centar in Zagreb
The gathering was attended by professionals from the gas and energy industries, representatives of institutions, board members of energy companies, directors of distributors, suppliers and other companies, including university professors and media representatives. In addition to marking the occasion of the Gas Day, the Assembly of the Croatian Gas Association (CGA) was held, at which the 2021 CGA Financial Report was accepted, including the 2023 CGA Work Plan and 2023 CGA Financial Plan.
At the opening of the session, the CGA president, Assist Prof Dalibor Pudić, PhD, commented on the actual and past events from this gas year. High energy prices on the European and global market have strongly impacted the Republic of Croatia. Gas prices have also had an impact on economic and financial trends, as well as the Croatian GDP. To mitigate the effects of high prices on the energy market, the Croatian Government has secured support for citizens and the business community totaling 25 billion kuna. However, the question remains as to how long these measures can continue. Therefore, it becomes necessary to appeal to households, the public sector and the business community to act responsibly and rationally use energy, with the aim of saving energy whenever possible. Furthermore, the CGA president has encouraged diversification of procurement and consumption of other forms of energy to provide additional leeway for gas in case of low temperatures. In conclusion, he mentioned that the Republic of Croatia is in a better situation than many other EU member states, given that it has a well-developed gas infrastructure, the LNG terminal on the island of Krk, the underground gas storage facility and natural gas production covering about 30% of total consumption, which guarantees a secure and reliable gas supply. The CGA president believes that the Government has made a great effort to ensure a secure and reliable gas supply for the heating season.
At the start of his address, the state secretary at the Ministry of Economy and Sustainable Development, Ivo Milatić, talked about the never-before more challenging gas year and important events for the gas industry. He pointed out that the Croatian Government responsibly and promptly identified issues associated with the questionable capacities of underground gas storage due to extremely high prices. Accordingly, an agreement was reached between the Government and gas storage lessees (who, on account of the current economic rationale, were not interested in filling the underground gas storage), where the company HEP (Hrvatska elektroprivreda d.d. – the full state-owned Croatian national electricity utility company) – will procure 270 million m3 of gas at 119 EUR/MWh. The Government committed itself to paying this cost. Based on this correct decision, the underground gas storage as of today is filled to a 98% level, thereby fulfilling the obligation in accordance with the European Regulation that underground gas storage facilities in member states must be filled to at least 80% of their capacity before the commencement of 2022/2023 winter, and thereafter up to 90% before commencement of the subsequent winter periods. Moreover, the Decision of the Croatian Government to increase gas supply security by constructing the Zlobin-Bosiljevo gas pipeline and expanding the capacity at the LNG terminal to 6.1 m3/year will undoubtedly contribute to the security and reliability of gas supplies in the coming period. For this purpose, there is the possibility of utilizing EU funds and financial instruments from the REPowerEU plan. The state secretary also touched on the Regulation of the Croatian Government where the natural gas producer INA – Industrija nafte d.d. is obliged to sell all gas produced in the Republic of Croatia to HEP with the aim of securing gas capacities and increasing the availability of natural gas in the Republic of Croatia. Quantities of domestically produced gas stored in underground gas storage facilities should ensure that consumers within the public supply service and public sector, guaranteed lower prices, receive a secure supply in the heating season. Moreover, the state secretary highlighted that price levels for the business sector have still not been resolved, for which a decision is expected at the European Union level and that the issue of speculation on European exchanges exists and must be resolved. He also announced the possibility of an excess profits tax for some energy companies, and the expectation is that the Croatian ministry of finance will soon propose the respective legislative Act, along with specific forecasts. The state secretary expects domestic natural gas production to increase to 1.2 billion m3 by the end of 2024. A strong initiative is needed to construct the Ionian-Adriatic Pipeline (IAP) to supply new quantities of gas from Azerbaijan and newly discovered gas fields in the Mediterranean. At the end of the exposition, he called upon the Croatian Gas Association to support state institutions in their endeavors to introduce hydrogen into the energy market.
The CGA president, Assist Prof Dalibor Pudić, PhD, extended his appreciation to the state secretary, Ivo Milatić, for the presentation and pointed out that the CGA has made an active contribution to drafting the legislative regulation for hydrogen. He also mentioned that the CGA has a Committee for Hydrogen, assigned the task of promoting and finding uses for hydrogen.
In terms of marking the occasion of Gas Day, presentations on the topic of current problems within the gas industry were held.
The first talk titled “The value of gas supply security” was held by Antonija Glavaš from the company Prvo plinarsko društvo d.o.o. At the start of the talk, she showed gas supply routes towards the European Union – the situation prior to the recent geopolitical crisis (total amount supplied: 400 billion cubic meters per year). Regarding the current situation, much has changed because Nord Stream 1 and Yamal-Europa no longer function, the Ukrainian flow is operating at reduced gas deliveries, while all other gas pipelines are functioning. Hence, LNG supplies to Europe have increased from the previous 70 billion m3/year to 140 billion m3/year. In these new circumstances, the Republic of Croatia has become an important transit country on the European map and an important starting point in the supply of natural gas. European storage facilities are practically completely filled; for now, there is enough gas, but it remains expensive due to numerous factors impacting gas prices. The general consensus is that the major impacts, in addition to geopolitical relations, are the speculation and announcement of news creating panic in the markets and creating a negative effect on prices that subsequently increase. In line with current thinking, the psychological threshold of pricing expectations has shifted, and climate insecurity has been created. Contracting is deferred, thereby creating large risks, eventually leading to insolvency and less consumption. There is, however, hope that some price stabilization will occur, but not at previous price levels. For this heating season, the general consensus is that the Croatian market will be adequately supplied with gas, except for the onset of extraordinary circumstances. The belief is that Croatian households will receive sufficient quantities at regulated but below-market prices. We appeal to all consumers for the need to save energy.
The next presentation, titled “Perspectives and Challenges in Increasing Gas Production in Croatia,” was held by Hrvoje Krpan from INA – Industrija nafte d.d. He gave a historical overview of the production of natural gas in the Republic of Croatia, which began far back in 1918 with the discovery of the first gas field called Bujavica. During the 20th century, gas production continued to increase (along with the associated infrastructure), peaking at 2.4 billion m3 in 2007, which then subsequently saw a fall on average of 10% per year. He also announced new projects that will increase gas production, halting the many years of negative trends. The North Adriatic project incorporates a program to develop gas fields on the Adriatic, construct 11 new wells and 9 platforms for additional production totaling 1.5 million m3/day of natural gas for the Croatian market and for significant increases in pumping gas and extending the lifecycle of fields. The Ika and Marica wells were drilled as new wells and have already been commissioned. Dravica-Zaláta is a transborder project to produce an additional 0.3 million m3/day of natural gas for the Croatian market, including equipping and connecting two drilled wells, developing two new wells, and constructing a collection-transport system. He especially addressed the issue of the long process of acquiring permits, which represents the main challenge for projects to increase gas production. Here, the emphasis was placed on double the amount of time needed for acquiring permits compared to the situation in Norway and three times longer than in Hungary. There is a general consensus of needing to cooperate with state bodies to quicken the process of issuing permits to deliver additional quantities of gas to the Croatian gas market as quickly as possible.
Ivana Marković, from Plinacra d.o.o., in her presentation titled “Readiness of the Transport System for the Heating Season,” pointed out the challenges gas transport system operators encountered when managing the transport system. She highlighted that in the first ten months of 2022, there was a 14% fall in gas consumption in the Republic of Croatia compared to 2021. Moreover, the structure of incoming natural gas into the gas transport system has changed, where the dominant role is the quantities of gas from the LNG Terminal on the island of Krk, accounting for 63%. In contrast, imports through interconnections account for 13%, own production at 15%, and underground gas storage makes up for 9%. There have been significant changes in reserve terminal capacities in Plinacro. Due to the volatility of gas prices, one-year reservations were replaced by monthly and daily reservations, requiring significant organizational adjustments in terms of personnel, information and infrastructural aspects in the company. Plinacro introduced a new model of contracting gas transport services. The framework agreement on gas transport is generated in the SUKAP system for a fixed period, at least until the end of the gas year and at most 15 gas years. Only one contract for the gas year (or 15 years) is signed, and the manner of contracting capacities at the interconnections and entries into and exits from the Republic of Croatia have been standardized. Increasing the capacity at the LNG terminal on the island of Krk to 2.9 billion m3 this year has led to increasing gas exports to foreign markets as enabled by the compressor station in Ludina. Plinacro performed all the necessary work in maintaining the gas transport system and is readily awaiting the coming heating season. In addition to the core business of the company as gas transport system operator, she further highlighted improvements to the business of Plinacro, which has become “an operator of key services” by fulfilling the obligations set by the Act on Cybernetic Security of Key Services Operators and Digital Services Providers and the Regulation on Cybernetic Security of Key Services Operators and Digital Services Providers of 2018.
Ivan Fugaš from the company LNG Hrvatska d.o.o. held a presentation titled “The LNG Terminal in the 2021/2022 Gas Year”. In the introductory section, he presented data on the global LNG market for 2021 related to the total capacities of LNG transport ships and the capacity of Floating Storage Regasification Units (FSRU). Moreover, he also presented the technical-technological characteristics of the LNG terminal on the island of Krk, with an expanded capacity of gasification equivalent to 2.9 billion m3/year (338,000 m3/h) and provided information on that there are no available leasing capacities until 2030. In the 2021/2022 gas year at the LNG Terminal on the island of Krk, a total of 29 ships (23 from the USA, 2 from Egypt and 1 each from Trinidad and Tobago, France, Qatar and Spain) arrived at the terminal, transshipment of 3,746,459 m3 (1,685 MT), and a total of 2.24 billion m3 of gas was gasified. In addition to the standard services, the LNG Terminal on the island of Krk began providing so-called non-standard services. The transshipment of LNG to trucks (ship to truck) for the transportation of LNG was also performed. The first transshipment operation was conducted in 2021, and so far, transshipment has been done for 114 trucks, equivalent to a total of 4,500 m3 of LNG. Reservations of orders amount to an average of 40 slots a month. The company LNG Hrvatska d.o.o. has announced that it will increase capacities at the LNG Terminal on the island of Krk. An additional gasification module will be installed for that purpose, achieving a total capacity of 6.1 billion m3/year.
Laslo Farkaš Višontai from the company Podzemno skladište plina d.o.o. held a presentation titled “Readiness of the Gas Storage System for the Coming 2022/2023 Heating Season”. The current fill state of the storage system at Okoli on 13 October 2022 was 96% of the operating volume, which is more than for the same day in the previous year when it amounted to 86%. During the gas year, all the necessary ongoing and investment maintenance works (servicing, repairs, overhauling) was conducted at the Okoli Underground Gas Storage. Works on constructing the future Grubišno Polje Underground Gas Storage began on 21 February 2022. The determined initial volume of gas in the deposits amounts to 198.6 million m3. The project for constructing the Grubišno Polje Underground Gas Storage is happening in two main phases. The first phase involves producing or exploiting gas from the original fields. The second phase is repurposing the fields into underground gas storage (the expected operating volume of the gas storage amounts to 60-100 million m3, at a maximum withdrawal of 100,000 m3/h and a maximum injection capacity of 70,000 m3/h). The Okoli Underground Gas Storage is readily awaiting the winter season and is prepared to meet any nomination by storage users without delay, as was the case in all previous years. The fill target of the operating volume for users, i.e., the storage target conforms to the criteria of the Croatian Government on the storage fill level for specific dates.
Srećko Ezgeta provided an overview in his comment on the actual problems associated with gas distributors and gas suppliers. He expressed satisfaction with the level of understanding from the Croatian Ministry of Economy and Sustainable Development and established dialogue. The Croatian Government has so far made good decisions for the household and public sector, but some measures to assist legal entities are also expected. Due to high gas prices, significant problems have appeared for those legal entities for which suppliers failed to secure gas. The gas market is unpredictable, and end users who are not tied to public service may today be exposed to 10-times higher gas prices than last year’s prices, which may lead to the closing of businesses due to the inability to do business subject to enormous energy costs. There are great expectations in resolving these issues at the level of the European Union level which is contemplating measures to prevent speculation (such as limiting gas prices by applying a price cap). The belief is that trade halting may be applied to gas exchanges, such as for classic stock exchanges, when there is an uncontrolled increase in the price of goods. Problems continue to exist at the start of the heating season due to uncertainties that confuse actors on the market.
The CGA president, Assist Prof Dalibor Pudić, PhD, continued with the premise that end customers may move on to other alternative fuels if gas prices become uneconomical for businesses. In conclusion, he highlighted the high readiness, reliability and security of the gas system in the Republic of Croatia for the coming 2022/2023 heating season. He invited those present and the entire gas sector to the 38 International Scientific and Expert Meeting for Gas, which will be held on 10-12 May 2023 in Opatija.