Montenegro Takes First Steps to Gas Industry

Montenegro can achieve multiple benefits stemming from the development of the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) pipeline projects commented the Minister of Economy, Vladimir Kavaric.

The senior Montenegrin official noted that the projects provides an opportunity to collect substantial funds from transit fees, but also that the construction of gas infrastructure will create conditions to allow a clean and cheaper energy source to be delivered to industry and households. In addition, there are hopes for commercial discoveries of natural gas offshore Montenegro.

"With the realization of the Ionian Adriatic Pipeline (IAP) regional pipeline, we will have the necessary infrastructure for its placing on the market. In this way the gas, as a very important source of energy, would come to Montenegro. It will be a chance to be not only a transit country, but a country that can offer its own gas reserves in the market. With the research of oil and gas and its production, we can make the first step towards the creation of this industry in Montenegro", Kavaric commented in an interview with Natural Gas Europe.

Montenegro, the smallest country in the Western Balkans with only 600.000 inhabitants, does not have a developed gas infrastructure. Officials hope that with participation in regional gas projects and exploration on its part of the Adriatic coast – that can be changed.

What is the current situation when it comes to gas industry in Montenegro?

The fact is that Montenegro does not have a developed gas infrastructure. We are a small market, and given that we do not have a developed gas industry, we have the intention to participate in regional projects which when implemented, Montenegro could see some significant benefits.

One such project is the building of the Ionian Adriatic Pipeline. Connecting with the Trans Adriatic Pipeline in Albania,  IAP would run through through Montenegro and Bosnia and Herzegovina to Croatia, where it would connect with the existing gas infrastructure network. In this way the gas, as a very important source of energy, would come to Montenegro, and the entire project will be given a new dimension if commercial reserves of gas be found in the Montenegrin coast. It will be a chance to be not only a transit country, but a country that can offer its own gas reserves in the market. With the research of oil and gas and its production, we make the first step towards the creation of this industry in Montenegro.

Does Montenegro have any kind of strategic document when it comes to gas?

Currently, there is a "Master Plan Gasification of Montenegro - The priority project portfolio in Montenegro" which will closely analyze all aspects of the development of the gas industry in Montenegro. The Master Plan is underway and expected to be completed during this year.

What about exploration in Adriatic Sea?

In so far research, the existence of geological structures in which it is possible to reach the finding hydrocarbon deposits is confirmed. Taking into account previous research of seabed of Montenegro, as well as analysis of the company that submitted a bid that clearly indicate the existence of this resource, give us additional optimism. We are extremely pleased because reputable investors submitted their offers especially if we have in mind that the detection of commercial reserves of oil and gas production and their risk for future investors who must invest in research. Simply put, if there are investors willing to invest money in research, there are chances that it has commercial reserves of hydrocarbon, oil and gas.

Is the government planning to explore coastal areas? How much money the Government is setting aside for gas research?

When we talk about oil and gas exploration in the coastal region of Montenegro, we think about the underwater world. So, at this time the focus is on the sea, not on land, which does not mean that in perspective we will not think about that. As for the cost of the research of our underwater, they fully borne by the exploring companies. The project was designed so that the Government does not participate financially in the process of exploration and production of hydrocarbons.

Does Montenegro have well trained experts to deal with gas reserves and exploatation?

Certainly, Montenegro has a human resources that can give their contribution in building the oil industry, but the fact is that we need to increase the existing capacity. It will not be difficult when the gas industry being developed and capable to create the necessary personnel itself, but also represents  a challenge at the stage where we are now - at the beginning of the process leading to the creation of new industries. In all of this, we expect the great help of the companies that will work on the research and which will be required to annually allocate funds that will invest in the training of local personnel. Such investment is in the mutual interest, because these same companies will have to set up their company in Montenegro and, of course, to employ a certain number of domestic people.

How Montenegro will benefit from TANAP and TAP pipeline projects?

Benefits would be multiple. From a financial aspect, Montenegro could transit fees because of the passage of TAP-IAP pipeline through our territory annually. The construction of gas infrastructure will create conditions that this clean and cheaper energy source comes to industry and households. As I mentioned, all this gets a whole new dimension in the case of commercial discovery of gas offshore, because with the realization of the IAP pipeline we will have the necessary infrastructure for its placing on the market.

Minister Kavaric, you had previously has announced that the country desired to be included in the now cancelled  South Stream gas pipeline project. Is Montenegro open additional supply from Russian sources?

Given that we are a country of about 600,000 inhabitants, our chance of achieving diversification of energy sources is to be part of a regional or European project. Each investment that would enable to Montenegro the arrival of gas, i.e. diversification of energy sources, and become a means of strengthening our economy, the Government is prepared to consider.

Does Montenegro have the necessary legislative about gas exploration and research?

Yes, we can say that we completed the local regulations when it comes to this area. In the previous period, The Government adopted a series of laws and regulations that governing the field of oil and gas - law on exploration and production of hydrocarbons, tax law on hydrocarbons, as well as regulations governing the field of calculating compensation payments for oil and gas production, development and production of hydrocarbons, drilling and construction of the exploration and production of hydrocarbons. In addition, the Government adopted the models of the Contract for  Concession for the production of hydrocarbons, the Agreement on joint operations and the Treaty on the accounting operations. By creating such a normative framework, we have set up equal conditions for all companies, encouraging the transparency and competitiveness of the market and allowing the proper development of the upstream industry in Montenegro.

What about the Chapter no.15 (Energetics) in negotiations with EU? Whats the status of that chapter and what Montenegro needs to fulfill in order to open-close that chapter?

Progress in this section is rated as very good, mainly due to the fact that Montenegro is a member of the Energy Community since 2006 and that works for nine years in order to monitor all the obligations imposed by the EU in this area. Of course, there are still a lot of work to fully meet the requirements that accompany this sector. Chapter of energy has not been opened, and the only measure to open the preparation of the Action Plan (AP) for the provision of required reserves in oil. In this regard, the AP is prepared and already discussed with experts from the European Commission, so that its adoption and opening chapters is expected very soon. Regardless of the opening of the chapter, it is our intention that this year our legal framework reconcile with the requirements of the third energy package, which is why we are currently working on the preparation of the new Energy Law and the Law on transmission systems for cross-border exchanges in electricity and natural gas. In the field of energy efficiency, the adoption of the new Law on the effective use of energy in December last year,  all obligations under the Directive states that work in this area were successfully transferred. During this year it is planned to adopt the Law on mandatory oil reserves.

How would you rate the cooperation with the neighboring countries when it comes to gas interconnections and researches? How important is regional cooperation in the matters such as gas suplly and pipelines?

Cooperation with countries in the region has recently intensified precisely with the aim of implementation of infrastructure and energy projects of regional and European significance. Such importance is certainly IAP pipeline project whose implementation is conditioned with the cooperation of the Western Balkans, and there I think of Albania, BiH and Croatia. It was this project, in addition to the Adriatic-Ionian highway  and Belgrade-Bar railway, marked as a priority, that is a project that will Montenegro, as well as countries in the region, to seek help from the European Union in its realization.

Also, besides Montenegro, other countries in the region have started or are planning to start projects of oil and gas in the waters of the Adriatic. We are sure that commercial discoveries of oil and gas in any part of the Adriatic,shall increase attractiveness and increase the ability to implement these projects in all other countries in the region.