Croatia: Oil and Gas and Renewable Energy Legislative and Market Update
Mining Act Bill
The exploration and exploitation of oil and gas in Croatia, performed in accordance with the legal framework in force, has faced several difficulties. The current Mining Act (Official Gazette 75/09, 49/11) regulates the exploration and exploitation of all mineral reserves, including hydrocarbons (oil and gas). This has proven to be ineffective because hydrocarbons exploration and exploitation requires a different approach than the mining of other minerals.
Furthermore, the legal gaps in the existing Mining Act have led to different interpretations, and consequently problems in its application, which turned potential investors away. Pursuant to the Mining Act 2009, only a few exploitation permits were issued, and not a single exploration permit. In December 2011 the government announced a tender for exploration permits in 14 areas in northern Croatia, but shortly afterwards the tender was annulled because the tender terms did not facilitate free competition (for further details please see "Oil and gas exploration update").
In order to launch a new tendering process for exploration permits in the aforementioned 14 areas in northern Croatia and other exploration areas, especially in central and southern Adriatic, the Ministry of Economy is eager to pass a new act which would facilitate the tendering process.
Based on input provided by professionals, the government decided to draft two separate acts – one that would regulate the exploration and exploitation of hydrocarbons and a second that would regulate the mining of other minerals. On August 28 2012 the wording of the latter was released by the ministry for public discussion. The comment period for any objections, opinions and suggestions to the bill ran to September 28 2012. The draft of the new Hydrocarbon Act is expected to be published in the near future.
Both acts are to be in accordance with the acquis communautaire (the EU's body of law) given that Croatia is scheduled to become a member of the European Union on the July 1 2013.
Plomin C tender
On July 24 2012 Hrvatska elektroprivreda dd (HEP), Croatia's national electricity company, issued notification for expressions of interest for a strategic partner in the design, engineering, financing, construction, operation and maintenance of the Plomin C coal-fired nuclear plant with a capacity of 500 megawatts (for further details please see "National electricity company calls for investors in €800 million Plomin C project").
Seven leading international companies placed their bids, but surprisingly not German RWE – a strategic partner in the Plomin 2 project. HEP shortlisted four bidders which will be invited to participate in the second stage of the tendering process: Italian Edison, Polish Polmot, South Korean Kosep and Japanese Marubeni. A strategic partner should be selected in the first quarter of 2013.
New oil reserves discovered in northeast Croatia
Croatia's national oil company, Industrija nafte (INA), has found new oil resources in the northeastern part of the country. The first discovery occurred in July 2012, with the Hrastilnica 3 well near Ivanic Grad. The latest discovery occurred in September 2012, within the Privlaka oil filed near Vinkovci. Daily oil production is estimated at approximately 1,400 oil barrels at the Hrastilnica 3 well and 600 oil barrels at the Privlaka well. INA's management expect new discoveries in the future as a result of its Pannonian basin exploration strategy, based on the search for new so-called satellite fields in the Sava Depression, near existing fields.
Renewables update
Croatia's renewable energy legal framework is divided into two basic acts – the Energy Act (Official Gazette 68/01, 177/04, 76/07, 152/08 and 127/10) and the Electricity Market Act (Official Gazette 177/04, 76/07, 152/08 and 14/11) – and five implementing regulations (for further details please see "Examining the renewable energy framework and market").
Since use of renewable energy resources is one of the strategic plans outlined in the Energy Development Strategy from 2009 to 2020, the government is eager to launch new projects and attract investors, especially in the solar and wind sectors. However, the procedures prescribed by the existing legal framework, which consist of seven different acts and regulations, are too complicated and time consuming. Therefore, the ministry is drafting a new Renewable Energy Act, which would consolidate the matter and simplify procedures. The new act is expected to materialise at the end of 2013.
The latest Eurostat report concerning use of renewable energy in 2010 indicates that Croatia's 14.6% share of renewables in gross energy consumption is above the EU average of 12.4%. The European Union and Croatia's target is 20% by 2020.
For further information on this topic please contact Miroljub Maćešić or Ivana Manovelo at Law Offices Maćešić & Partners by telephone (+385 51 215 010), fax (+385 51 215 030) or email (macesic@macesic.hr or manovelo@macesic.hr).
This article was first published in the International Law Office Energy & Natural Resources Newsletter – www.internationallawoffice.com