Is Croatia going to drown in LNG?
Is Croatia aspiring to build a new bottomless money pit? The mysterious similarity between the new Croatian “Lex -LNG” and the economic failure of the Livorno plant in Italy.
Originally published in Italian on La Voce del Popolo on 12 November 2018
The Croatian government decided to build the LNG terminal on the island of Krk, come hell or high water. The opponents were many but inarticulate. Environmentalists on one side, the local community on the other, all accompanied with political opposition clashing in the background. Everyone was looking exclusively at its own (or presumed) interests without creating operational and intellectual synergies. In this tide of disjointed criticism, what could have proven to be the real Trojan horse of this ad hoc law has gone unnoticed. Article 12 of the Decree, entitled “Preventive measures for the security of supply” provides for the possibility of collecting a “security supply fee”. The fee would be set by the National Agency on Energy Regulation on an annual basis, in line with the proposal of the gas transport system operator — the state-owned company Plinacro. This company, together with the Electricity and Energy Authority (HEP) is also co-owner of the company called to manage the future regasification terminal, the ‘LNG Hrvatska’. Long story short, this article allows the funding necessary to make this project economically sustainable — if there was no commercial interest in the LNG terminal — to be collected through a special tariff paid by all gas users in Croatia.
The LNG terminal has been planned with a capacity of 6.5 billion cubic meters of gas per year. The project owner, ‘LNG Hrvatska’, reduced the designed size of the plant to a maximum annual 2.6 billion cubic meters of gas. The tender for allocating the capacity of the new terminal for a minimum volume of 1.5 billion m3 has already been extended three times due to lack of interest. Which says a lot about the attractiveness of the future terminal for foreign investors.
To understand the severity of the situation we can analyse a homologous case, the history of the regasification plant in Tuscany. Entered into operation in December 2013, located 12 miles from the coast, between Livorno and Pisa, the regasification plant ‘Olt’ is the beneficiary of the “guarantee factor”. The plant has been defined of strategic importance by the Italian government and as such the State guarantees coverage of 71.5% of operational costs.
How much did this strategic project cost taxpayers? According to a report by “Il Fatto Quotidiano”, the Authority for Energy and Gas estimated that only in 2015 the increase in the gas bill to finance the plant was 1 euro and 60 cents per consumer, for a total of 83 million euros. Operating results generated the financial loss: from October 2014 to September 2015, the Olt terminal processed 100,000 cubic meters of liquid gas, while the terminal capacity was 6,356,250 m3 of liquid gas.
All right, the 2015 data are bad. Perhaps until today, the situation has improved? According to the official data of the Olt consortium, from September 2017 to October 2018 (latest data available) the terminal regasified 373,000 cubic meters, leaving the production capacity unused for 5,983,205 cubic meters, presumably generating further losses.
The future Croatian LNG terminal and the one from Livorno have many things in common. Do we see the future of the Croatian LNG terminal in the losses of the Tuscan terminal? The Croatian “Special LNG law” could also prove to be a new bottomless money pit, and to pay the losses this time will be only a fraction of the Italian gas users, making the final bill split much more expensive.
