Gas from the pipeline is five percent cheaper than liquefied gas

The Croatian portfolio of gas supply routes needs to be balanced and the share of LNG controlled. Likewise, the share of Russian or any other individual source should be kept below monopolistic levels.

writes Jasmina Trstenjak
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Croatia has jumped on the last train and achieved a degree of energy security. After Serbia, Hungary, and Slovenia, it was the last country in the region to join the South Stream project in early March. This approximately $20 billion pipeline system, which allows Russia to bypass the ‘unreliable’ Ukraine on its way to Western European markets, has dealt a heavy blow to the significantly cheaper Nabucco European pipeline project. The purpose of South Stream is to prevent the EU from starting to realize a pipeline that is not under Russian control. On the other hand, Nabucco, supported by the US and the EU, is trying to open a gas route from Central Asia that would bypass Russia. This would reduce European dependence on Russian gas, but its realization is still in the initial phase.

Without concessions
According to the plan, Gazprom could bring gas to the region via South Stream by 2015/2016. By then, the Croatian market will again need a new quantity of gas. Stevo Kolundžić, former advisor to the CEO of INA, believes that the only LNG terminal on Krk could start operating sooner, perhaps as early as 2014. – In the meantime, there are no solutions, except for occasional auxiliary and emergency measures. Or, when the interconnector connecting the Hungarian and Croatian gas systems is built, gas will be able to be purchased on the European market and transported to the Croatian gas system – says Kolundžić, former advisor to the CEO of INA. Whether South Stream will pass through Croatia and thus provide advantages is still uncertain. The Russian energy giant Gazprom, one of the three largest companies in the world and a driving force of the Russian economy in almost complete state ownership, has agreed with the Croatian company Plinacro to establish a joint company with 50% ownership for each party. The feasibility study for the Croatian section of the South Stream pipeline should be completed by the end of the year at the latest.

Kolundžić believes that the passage of South Stream through Croatia would bring multiple benefits to the state. – Security of supply significantly increases. From an economic perspective, if Croatia were a transit country, the quantities would be between 10 and 12 billion cubic meters, which would require investments of around 200 million US dollars. The national gas transporter would benefit directly, while the national economy would benefit indirectly. Whether this can happen is a difficult question. In any case, only economic interests can decide, and Croatia has no reason for any additional concessions or special incentives for investors – claims Kolundžić.

Advantages of the pipeline
In addition, claims the former advisor to the CEO of INA, the advantage of South Stream is that gas transported through pipelines on the Croatian market is approximately five percent cheaper than LNG. – For this reason, the portfolio of gas supply routes needs to be carefully balanced and the share of LNG controlled, just as the share of Russian or any other individual source should be kept below monopolistic levels – he says. In any case, Croatia would gain additional routes for importing Caspian gas through South Stream or Nabucco, which it must secure according to the ‘Energy Strategy’. If the terminal on Krk for liquefied gas (LNG) is realized, the degree of energy security would be at a commendable level. However, the chances of the EU directly supporting South Stream, which Russia sees as a means of weakening its internal unity, are slim. If the European Commission supported the first, it would destroy the second, and the success of South Stream reduces the likelihood of building Nabucco. When it comes to Croatia, it may have secured energy security, but it has also slightly strengthened Russia’s influence in Europe. Because of this step, it is more susceptible to Russia, which, thanks to its monopoly in the energy market, could react to any move by a state that slips out of its control by cutting off supplies.