Gas Wells near Vukovar to Generate $10 Million Monthly Revenue, but for Canadians

The Canadian oil company Vermilion announced, while presenting its business results for the third quarter, the construction of gas infrastructure for its wells in eastern Croatia, which are expected to generate $10 million in monthly revenue.

Vermilion further announces that they have already begun site preparation in eastern Croatia for a future gas facility, which is planned to be operational by mid-2024. However, in addition to exploitation and the new facility, the Canadians announce that they continue to seek new gas sources in Croatia, which seems to have proven to be quite high quality.

– We are currently in the process of building Croatian gas facilities. There we have a nominal sales capacity of about 15 million cubic feet per day. I think in Europe you have to think about those numbers not only in terms of quantity but in terms of a much greater net return than we assumed, especially compared to returns in North America. If we imagine Croatia with 20 million cubic feet per day in those two wells, that could generate $10 million in monthly revenue and with netback profits (editor’s note: gross profit from gas production) that are about seven or eight times higher than in Canada – said Darcy Kerwin, Vice President of Vermilion Energy for International Business during the presentation.

According to information from the company, gas production growth in Vermilion’s international operational projects will increase by 11 percent next year and by five percent in North America.

By the way, Vermilion Energy, which is listed on the New York Stock Exchange, reported strong growth in business results in the third quarter of 2023, and according to announcements of new projects in Croatia, as well as in Germany and Australia, revenues will also have solid growth rates next year. Their wells in Croatia cover approximately 515 thousand hectares, making Vermilion, as stated on their official website, “one of the largest landowners in the country.”

One Well Also Awarded to INA

However, Vermilion is not, or at least should not be, the landowner, but only a concessionaire over the wells. Recall that in July 2014, a tender was announced for the exploration and exploitation of hydrocarbons on land (Pannonian Basin). A total of six exploration areas were defined, extending along the Drava, eastern Slavonia, and Sava regions.

Based on this tender, five contracts were signed in 2016, four with the subsidiary of the Canadian company Vermilion Zagreb Exploration d.o.o. and one with INA – Industrija nafte d.d. The drilling workspace was prepared, and on June 17, 2019, drilling began, and judging by Vermilion’s plans, there is plenty of gas in the Pannonian Basin.

The profit that should stimulate further growth of the Canadian oil giant will unfortunately not remain in Croatia, which will only receive crumbs. Namely, according to the concession agreement, the Canadians will only pay Croatia a fee for gas exploitation, and this fee will be shared among the budgets of the state, municipality, and county where the wells are exploited.

– However, this fee also includes a percentage of the profit, so in the end, everyone will still realize higher revenues based on gas exploitation – emphasized Davor Štern, an energy expert. He claims that the announcements of achieving ’10 million dollars in monthly revenue per well in this business are not such a spectacle.’

– Solid, but nothing more than that – claims Štern, adding that not only local communities and the state will profit, but also Plinacro, which will distribute Pannonian gas.