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Croatia Opens Tender for Adriatic Oil & Gas Exploration

Source: Reuters 4/2/2014, Location: Europe

Croatia published an international tender for oil and gas exploration blocks in the Adriatic, hoping to attract major oil firms and start production in five years despite protests from local environmental groups.

The tender will run for seven months, and the government is expected to award concessions in early 2015 at the latest. New oil and gas fields should help the European Union's latest member reduce dependence on energy imports.

"We have been underexplored for the last 20 years, particularly offshore," Economy Minister Ivan Vrdoljak told executives of around 30 oil and gas companies at a conference.

Croatia expects investments worth some $2.5 billion over the next five years in exploration activities. Local media have mentioned companies including Exxon, Shell and Eni's unit Agip as likely participants, but the government declined to confirm that.

"The fact that we've prepared this project shows that Croatia can be a reliable partner who can smartly manage its resources," Vrdoljak said.

The tender envisages 29 block areas for exploration and future exploitation, eight in the north and 21 in central and southern Adriatic. The size of one block ranges between 1,000 to 1,600 square kilometres.

Each bidder will be able to compete for an unlimited number of blocks, Barbara Doric, the head of Croatia's hydrocarbons agency, which prepared the tender, told Reuters.

GAS NORTH, CRUDE SOUTH

She said that according to the preliminary data, gas reserves were more likely to be found in the north and crude deposits were expected in the southern part of Croatia's Adriatic, where the seabed is deeper.

The exploration concession is envisaged for five years with a possibility to extend it for one more year, while exploitation concessions are planned for 25 years.

The economy ministry said it expected a considerable number of bids from major global energy firms, given the strong interest from potential investors for the data room with preliminary findings.

Local environmental groups say oil drilling would harm the local fishing industry and tourism.

Marketing its coast as the "Mediterranean as it once was", Croatia earns 7 billion euros ($9.7 billion) a year from tourism, more than 17 percent of the total national output.

"We think exploitation of gas and particularly oil could have a devastating effect on the environment," said Sven Janovski, an activist of Zelena Akcija (Green Action), which is pushing for a public debate on the issue.

"It could ruin the landscape, and in the worst case we could have an oil spill that would quickly spread because the Adriatic is small and relatively closed. The government never mentioned whether it plans any precautionary or emergency measures," he said.

Doric said the government planned to include strict environmental protection standards in the tender.

Croatia currently covers about 65 percent of its annual gas consumption of 3 billion cubic metres from its own fields offshore. It hopes to be able to meet the entire local demand from the domestic wells following the new exploration efforts.

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