In the event of a shortage, the Government can retain gas from LNG by decree

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If Russia shuts off the gas supply to Europe, Croatia will not have enough gas despite LNG. Unless foreign lessees of the LNG terminal take pity on us and decide to sell gas specifically to us, rather than to other buyers.

This arises from a simple calculation of domestic gas consumption and production, as well as the contracted capacities of domestic companies in LNG.

Namely, domestic gas production amounts to about 0.78 billion cubic meters, HEP has 0.56 billion cubic meters of gas for 2021, and for the next year, it has 0.65 billion cubic meters of contracted capacities in LNG, while INA leases about 100 million cubic meters. Adding these figures together, we arrive at a total of about 1.5 billion cubic meters, which is almost half of the domestic needs that range between 2.8 and 3 billion cubic meters annually.

When asked directly about the scenario of closing the tap from Russia, all those to whom we officially sent inquiries avoided direct answers or expressed hope that the problem would somehow be resolved.

The state will fill Okoli through HEP

– As you know, the problem of long-term secure gas supply for Europe is being addressed through a joint approach at the European Union level. All national governments have been involved in solving this problem. The Ministry of Economy and Sustainable Development issued a Decision at the end of April declaring an early warning regarding the level of crisis states for the protection of gas supply security in the Republic of Croatia. This decision plans to fill the underground gas storage Okoli to a level of 90 percent by the beginning of the new heating season, i.e., by November 1, 2022. Along with the supply of gas through the LNG terminal, this will guarantee a secure gas supply in Croatia for the next heating season. Hrvatska elektroprivreda, as one of the largest buyers and consumers of gas in Croatia, will fully contribute to the activities of the Government and the Ministry in solving the gas supply problem – they responded from HEP.

Although they did not say it directly, from their response, it could be concluded that HEP will be the company through which the state will fill the Okoli storage if the lessees do not do so.

Namely, the Ministry’s decision that HEP refers to states that lessees of the Okoli storage capacities are obliged to fill the contracted capacities so that by August 1, they have filled 63 percent of the capacity, by September 1, 68 percent, by October 1, 74 percent, and by November 1, 90 percent of the capacity. If they do not utilize these capacities, they are obliged to inform the Ministry of Economy and will lose the right to store gas in PSP Okoli and will release the contracted capacities in favor of forming strategic gas reserves. Or, simply put, if the lessees do not fill Okoli, the state will do it.

At PSP Okoli, they do not know through which company the state plans to fill the storage.

– We do not have data on where, i.e., from which sources gas will be procured, nor information on which company or institution will take on the obligation to fill the underground gas storage in Okoli. On the gas day of May 10, 2022, the working volume of the storage users was filled to 19 percent of the contracted capacity. Since the regular injection cycle began on March 7, 2022, at 6:00 AM, the quantities of gas injected so far are negligible and are largely intended for system balancing. According to the Rules for the Use of the Gas Storage System, the injection cycle can last until September 30 (+/- 30 days) of the current storage year. The dynamics and exact date of the end of the gas injection cycle, as well as the state of filling, primarily depend on the users of our storage, but, according to the technical and technological characteristics of PSP Okoli, three months are needed to achieve a minimum filling of 90 percent by November 1, 2022, as mandated by the Crisis Team’s decision – they responded from PSP Okoli.

Neither INA nor HEP have leased additional capacities?

However, filling the Okoli storage, with a capacity of 530 million cubic meters, is conditio sine qua non, so the fact that it will be filled thanks to the aforementioned Ministry decision does not mean that there will be enough gas if the source from Russia ‘runs dry’. Namely, at certain times in winter, about 700 thousand cubic meters of gas is needed, and since we can obtain 90 thousand cubic meters from our own production, and from Okoli a maximum of 240 thousand per hour, it is evident that gas from imports, LNG, or Russia is needed to meet all needs.

We were unable to get a response from the Ministry of Economy on how the state plans to ensure enough gas if Russia blocks its delivery, so we were left without an explanation for the recent statement by State Secretary Ivo Milatić that we can count on a secure 1.5 billion cubic meters from the LNG terminal, when INA and HEP together have contracted about 660 million cubic meters in LNG for this year, and 750 million for the next year.

We tried to find out whether HEP and INA perhaps leased additional capacities in LNG Croatia, since LNG announced at the beginning of April that existing or new users of the LNG terminal in Omišalj could submit requests for the allocation of new free regasification capacity at the terminal.

– The new free capacity you mentioned was offered on April 11, 2022, and has been leased. The companies that leased capacities for 2022 are already existing users of the Terminal – they responded from LNG Croatia, but did not specify whether this might be INA and HEP.

However, we received a response from INA that the company did not lease additional capacities, and although HEP did not directly confirm this, their response suggests that they did not take additional leases in LNG in April.

– Over the past two years, HEP has leased additional capacities, thereby ensuring the diversification of gas supply routes for its own needs – they responded from HEP to the direct question of whether they increased their lease in LNG in April.

Lessee decides for themselves whom to sell gas to

We also tried to get an answer from LNG Croatia on how much gas we can count on from them, but we received a diplomatic response that ‘all users of the Terminal are companies registered in the Republic of Croatia and that the fact that some of them are foreign-owned does not mean that the gas they supply through the Terminal is necessarily delivered to the countries where their parent companies are registered.

– All users of the Terminal can sell their supplied gas in the Republic of Croatia or export it to other countries connected to the gas transport system of the Republic of Croatia. This is exclusively a business decision and strategy of the Terminal users, and LNG Croatia d.o.o. has no influence on the making of these decisions – reads the response from LNG Croatia.

Thus, we can hope that in the event of a crisis, companies MVM CEEnergy, MET Croatia, and PPD, the largest lessees of LNG, will decide to sell their gas in Croatia. And if these companies decide to find buyers outside the borders of our beautiful country, it is more than evident that Croatia will lack gas.

– If such an unfortunate scenario were to occur, there is a crisis scenario in which gas deliveries would be reduced to certain customers. Petrokemija, refineries, and other large industrial customers would be the first to be left without gas. Recently, at the International Scientific and Professional Meeting of Gas Experts, it was mentioned that in such a situation the Government could issue a decree stating that due to the crisis situation, it will retain gas from LNG. However, such an intervention ‘seizure’ of gas from LNG lessees would, of course, have significant repercussions – said an energy expert who wished to remain unnamed.