INA Anticipates Croatia Offshore Licensing Round
Croatia, a country of 4.2 million, is stepping up efforts to boost investments in energy infrastructure with a focus on oil and gas explorations in the Adriatic Sea. On April 2 2014 the long-awaited first offshore licensing round for the exploration and production of hydrocarbons in the Adriatic Sea was opened. Meanwhile, Hungary’s MOL and Croatian authorities continue their arm-wrestling over the future of Croatia-based Industrija Nafte (INA), which is owned by the Hungarian oil company (49.08%), the Republic of Croatia (44.84%) and institutional and private investors (6.08%). Natural Gas Europe had the pleasure of speaking with Lilit Cota, Director of Exploration Projects in SE Europe at INA. We spoke about business opportunities in Croatia and outside Europe, with an eye on new partnerships.
Croatia appears to be courting American investors to step in. Is INA looking for American investors as well?
INA has six decades long experience in exploration and production of hydrocarbons both onshore and offshore. Our excellent experts and professionals have been working on a number of significant upstream projects in different environments, from East Asia to West Africa. In domestic arena we have the experience of offshore operations & production from North Adriatic where significant results have been achieved. Today, after 15 years of production together with our Italian partners we operate 19 platforms on 10 gas fields with 46 production wells. With our experience and exquisite knowledge of the Adriatic subsurface and databases available, we believe that INA would be a great and desired partner to any company. Will this be a partner from United States or some other country is not the key issue; what is important is that the partnership will be based on fair terms and that each partner will bring valuable assets to this deal. Since INA is lacking deep offshore expertise, of course that the company with that kind of experience and outstanding HSE records would be most welcomed.
In a recent presentation by INA in London, you said that your knowledge of the geology is your main asset. How do you think you can optimize this asset?
We are already optimizing and utilizing this asset – we wouldn’t be so successful in terms of exploration if we wouldn’t have this knowledge. For example, within last five years we’ve made string of pearls discoveries in the northern Croatia Pannonian basin, even though the basin is quite mature from the exploration prospective. Our success ratio in northern Croatia onshore has been around 80% and close to 70% in Northern Adriatic. INA is strongly dedicated to its exploration and production activities in Croatia and is at the moment the only company with the required equipment, experience, knowledge and projects that can speed up activities in continental Croatia. We know the best how to navigate through sometimes quite complex administrative and permitting procedures and have very good relations with the local communities. As for our strategy, we are focused on organic growth where Croatia is still perceived as one of the strategic pillars. Only last year we drilled 7 exploration wells in Croatia which is showing our commitment to Croatian onshore & offshore projects. We have also launched our pilot project of unconventional drilling.
What were INA's capital investments in the last years? Do you also plan investments outside Croatia?
All these intensive activities contributed to a significant increase in capital investments during 2012 and 2013. Out of total investment in Exploration and Production in 2013, worth USD 245 million, USD 194 million were realized in Croatia. However, we are aware that our strategic goals cannot be fully met by the Croatian projects so the company also plans to grow further and expand its portfolio with new projects abroad. We are monitoring and analysing the opportunities in MENA region and West Africa but not limited to those areas exclusively.
You also referred to the onshore licencing round. The blocks on offer would be within mature basin that you know quite well. Is there a particular profile of companies potentially interested in a partnership with INA?
As said earlier, INA has been exploring Pannonian basin for the last sixty years so we are aware of the potential of this area. Within the past five years we have drilled 13 wells, discovered four small onshore oil fields and one gas condensate field on the border between Croatia and Hungary. After the results of our 2013 onshore drilling campaign several new discoveries were indicated which need to be further tested and appraised. These days we are focusing on the finalization of works on EOR (Enhanced Oil Recovery) Project which is expected to have a significant impact on the oil production from two of Croatia’s oldest oil fields. In addition to that we are in the late phase of Međimurje Gas Project realization in order to put into production three mid-sized gas fields. A number of development projects are currently addressing issues of boosting production and enhancing recoveries from INA’s old fields. Even under the new circumstances where the government is about to issue tenders for new blocks we plan to continue with exploration activities in Pannonian either alone or in partnership with the interested companies. So, although the Pannonian basin is quite well explored area, we believe that with implementation of some new methods - tertiary recovery for example - or new techniques - in unconventionals - there are still potentials for commercial exploitation although we don’t expect sizeable, high-impact discoveries. Therefore, in terms of potentially interested companies we can imagine small to mid-sized companies with cautious to averse risk appetite. These could be companies specialized in reinvigorating old oil fields, experts in unconventionals or companies pursuing mid to low risk and relatively low reward opportunities in general.
What about the offshore licensing round launched in April? How many of the twenty-nine blocks are you interested in?
Despite the fact that we operated the area for more than three decades we visited data room in mid-May and reviewed the new piece of seismic data so we are now in the process of re-interpretation and revising our traditional exploration concepts in the light of new data. It is the most natural thing that with all our expertise and data available we should know the area in depth and better than some of the potential competitors. It is quite a large number of blocks on Tender but considering our past experience and the fact that certain areas have been more explored than the others we will make the final selection. Our decision on which Blocks to bid for is going to be based on many elements and criteria, but definitely we would be more interested in pursuing oil plays in the area. One of the criteria would definitely be based on finding the best business models for the particular Block of interest in the context of potential consortia to be established.
INA already cooperates with ENI and Edison in offshore blocks. Will this be extended in the new bid round?
INA has very correct relationship with both of those Italian companies and showed as a trustworthy partner on common Adriatic projects. Given the geographic setting, their strength and their experience in the area we can imagine these two companies could be seriously interested in pursuing Adriatic opportunities. With ENI we have even deepened our cooperation in Egypt. However, this doesn’t necessarily mean that we will not be discussing the potential deals with other companies. We are quite opened for a dialogue with any company or a group of companies if at the end of the day we can recognize common goals and interests. As mentioned earlier, potential partners’ expertise and good track records will be important when it comes to making final decisions. Not only in case of Adriatic but also on several other INA’s international projects, INA is seen as a respected partner and even some big global oil players recognised us as a valuable and appreciated company.
Sergio Matalucci