12th December 2014

South Stream project down, Croatia to reconsider Krk LNG hub

In the beginning of December, Russia announced the end of the South Stream project. The gas pipeline was planned to bring Russian gas to the Central and Southeastern EU Member States, while circumventing Ukraine. The EU did not oppose the project, although it would have not increased significantly the bloc´s energy security, but insisted that the pipeline be built and operated in accordance with the EU laws. This was the key problem of the whole project. Gazprom, the Russian gas exporter, wanted to co-own the pipeline, but this is not possible under the EU´s third energy package. Negotiations with the European Commission were dropped last spring and the matter was instead brought to the attention of the WTO. The construction, nevertheless, continued. Under pressure from the Commission, though, Bulgaria, the key transit country, suspended construction of the project, until the project was buried by Russia itself.

Without South Stream and Nabucco pipelines, the opportunity for an eventual Croatian LNG hub re-opens. Croatia planned to construct an LNG hub on the island of Krk. This could be linked to the existing infrastructure and could diversify gas supply for the Balkans and for the Central Europe. But economic considerations stopped the project. Now, it is said that Croatia considers re-starting the feasibility study. The process could eventually lead to the construction of the terminal, starting in 2016 and ending in 2019. The terminal could bring up to 6 billion cubic meters of natural gas from new sources to the EU. If the necessary interconnectors were built, together with the Polish LNG hub under construction, this would mean a lot for the energy security of the Eastern part of the EU. Apart from the LNG hub, Croatia is also exploring its own sources of oil and gas in the Adriatic.

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Members of the American Chamber of Commerce in the Czech Republic