A Newly Emerging Adriatic Natural Gas Exploration Sector

The key role of Adriatic and central Balkans in the EU future gas mix

Interesting findings were presented by key corporate and state players regarding the expectations of natural gas explorations in the Adriatic Sea and Central Balkans during the recent 2nd Annual Balkan Oil & Gas Summit held in Athens, Greece.

The current state of the gas sector was discussed along and new plans to link the Balkans with the wider European gas market was announced.

More specifically, Croatia's alternate finance minister Alen Leveric stated emphatically that his country places a great deal of importance on the Ionian Adriatic Pipeline (IAP), which it is viewed as an offshoot of Trans-Adriatic Pipeline (TAP).

In fact, the Croatian government is actively pursuing the construction of IAP so it is ready at the same time as TAP to transfer the Azeri gas from Shah Deniz mid-2019.

The Croatian minister also revealed Croatia's plans to proceed with establishing the Croatian-Hungarian-Ukrainian gas route that will be formally announced as a plan in November 2013.

The line aims to diversify imports for both Hungary and Ukraine by using Croatia's imports from TAP-IAP and use the LNG terminal on Krk Island in the Adriatic Sea. With a terminal code name of 'Adria LNG', its capacity will be at least 10 bcm per year.

Moreover, Croatian mid and long-term planning in terms of gas market diversification and energy security envisages a boosting in the interconnection systems of Balkan and Central European countries.  Zagreb wants to play a decisive role by stretching out its strategic position in the trans-regional market between the Baltic, Adriatic and Mediterranean Seas.

Croatia also moves on with exploration rounds in its offshore economic zone in 2014, whilst Spectrum ASA and its business development manager, Jevon Hilder, announced that it has already conducted seismic research in the region and noted optimistic findings.

Spectrum considers the North Adriatic offshore zone a promising area and in the near future conclusive results will be made in public.

Concurrently, neighboring Montenegro is to announce the issuing of preliminary tenders for offshore explorations in October 2014 and will start accepting binding offers for those in February 2014.

The deputy minister for mining and geological research of Montenegro Vladan Dublejevic also acknowledged the importance of the IAP pipeline for his country and the great expectations that were formed when TAP was selected.

Since Montenegro does not currently have a natural gas sector, a gasification project is underway in parallel with the exploration process, which according to the government is promising, judging by earlier findings by geologists in the Adriatic Sea.

Albania, which is another Balkan-Adriatic country, used to be a producer of gas in rather small quantities in the past, and aims to invest more in its mature fields.

According to the President of Stream Oil & Gas, Sotirios Kapotas, Albania has potential in two fields, the Delvino and those in the central-West regions.

Despite the fact that production likely would not be sufficient for exports, Stream has plans to invest and is certain that gas is a key element for the future of the Albanian economy, which is currently 98% dependent on hydroelectric production for its electricity needs.

Thus, Kapotas believes that a gasification project, which will be directed in securing a steady production from mature sites, is feasible, while the TAP pipeline will further introduce greater quantities of gas to the country for decades to come.

A second stage would be the linkage of Albania with the whole regional interconnector system, which will facilitate industrial growth and solve deficiencies in the electricity supply system.

At offshore locations, companies Cairn and San Leon are active and have acquired exploration licenses and 3D seismic research has already been completed and interpreted. Developments are expected on that front as well.

Lastly, Serbia, at the center of the Balkan region, has its own set of expectations according to Mikhail Danilin, Deputy E&P Director for Development, NIS.

Already exploration projects are underway in the Panonian basin in a 4,000 sq.km region where gas is expected to be found.

Furthermore NIS has already conducted a 2D seismic survey in Bosnia and drilled an exploration well in May 2013.

In Hungary along with its partners, RAG and Faloc, several exploration wells have been established and NIS is scheduling to enact a multi-million dollar exploration project in Romania as well.

The Serbian Company also believes that its corporate structure, which is affiliated with Gazpromneft, together with the participation of Serbia in the South Stream project, further adds to the prospects of both Serbia and the region to become primal natural gas hubs for the rest of Europe.