After years of stagnation with terms deemed not positive for oil and gas investors and nearly no offshore exploration since the end of the 1980s, the tide appears to be turning in Croatia.

“Before 2014 Croatia was not prepared,” said Alen Leveri?, the country’s deputy economy minister. “In the past there were challenges to change the law, have new seismic data, to give security of investment. We’ve finished all of this.”

Streamlined regulations are in place, a new hydrocarbons agency is open, and the country’s hydrocarbons law is updated and aligned with European Union (EU) regulations and worldwide best practices. Hopes are that these accomplishments, with proven oil and gas areas in the Adriatic Sea, will lure oil and gas companies to Croatia.

“Croatia must work under the EU’s terms. That means stability for companies that come to Croatia,” Leveri? said, pointing out that in this regard Croatia is on the same footing as countries such as Italy, Cyprus, and Greece. “What is there is also in Croatia. So this gives investors security. Also, this means that the company has to deal with the rules and directives in the areas of the environment, production, and free market.”

The EU newcomer is on pace to launch its first offshore licensing round this month.

“I think we have done a lot of efforts in 1.5 years in this area. I hope investors will see this positive approach by the Croatian government and minister of economy,” Leveri? said. “With the new law, the new data and everything, it’s something that is very interesting and positive.”

Licensing round nears

Prerequisites for the upcoming licensing round were unveiled in late February after the country’s hydrocarbons agency – dubbed a one-stop shop where investors can be guided through the process – opened for business.

Croatia will offer 29 offshore blocks ranging in size from approximately 1,000 sq km to 1,600 sq km (386 sq miles to 618 sq miles), according to Ivan Vrdoljak, the country’s economy minister.

“Even though additional offshore areas have been previously available for exploration, we excluded near-shore and other sensitive areas,” Vrdoljak said in a prepared statement. Fiscal terms have been defined, and “an extensive benchmarking exercise has been undertaken to ensure that we will be competitive with both our regional and global peers.”

Companies will get a chance to venture onto Croatia’s side of the Adriatic Sea and possibly hit hydrocarbon pay in the proven Pliocene gas plays of the northern Adriatic or tap oil in the pre-Tertiary farther south. Information such as block maps, fiscal terms, and a model contract was set to be available for download via the hydrocarbons agency website by the second week of March.

The offshore license round will be followed by the opening of the onshore license round by 3Q.

Leveric said the country’s hydrocarbon potential is “huge.” It’s too early, however, to speak in absolute terms concerning resource expectation.

Assessing the possibilities

Beginning in September 2013, Spectrum acquired multiclient 2-D seismic data targeting underexplored areas of the Adriatic basin offshore Croatia covering approximately 15,000 km (9,320 miles) of long offset with a 5-km by 5-km (3-mile by 3-mile) grid. All processed data will be available by early April.

“What we can say is we are seeing with the better higher resolution data lots of structures that are possibly hydrocarbon-bearing – both within the shallow gas-prone section, which is the Miocene-Pliocene, [and] also within the deeper carbonate play, which already has oil-proven structures on the Italian side of the Adriatic,” said Jevon Hilder, project manager for Spectrum.

A 2010 hydrocarbon potential assessment of the slope deposits along the southwest Dinarides carbonate platform edge showed the estimated recoverable reserves are between approximately 386 MMcm and 524 MMcm (14 Bcf and 18 Bcf). Estimated original oil in place could be between 13 Bbbl and 19 Bbbl.
The study, which was based on 12 interpreted cross sections of the north, central, and south Adriatic, also noted the oil discovery on the Rovesti structure on the Italian side of the Adriatic in 2007, where commercial oil quantities were found.

“It is very difficult to assume that along the whole edge of the carbonate platform the same sediments were almost continuously saturated with hydrocarbons, but it can be assumed that there is bigger or smaller number of possible accumulations that would contain significant quantities,” the study said.

Barbara Doric, interim president for the hydrocarbons agency, spoke during the NAPE International Conference in Houston about the country’s exploration opportunities and its market potential during a presentation with the deputy minister.

“We have a proven hydrocarbon province which is largely unexplored. We have a stable democracy. We have recently become a member of the European Union, and we are a member of NATO,” she said. “We have a significant offshore area – 57,000 sq km [22,008 sq miles]. We have [a] skilled labor force, and we have a government that is very committed to positive reforms in Croatia, especially when it comes to investments in hydrocarbons.”

Croatia currently has more than 60 exploitation fields, Doric said before comparing offshore Croatia to Italy’s more developed offshore acreage. Italy has drilled more than 1,350 wells offshore the Adriatic, compared to Croatia’s 116. Italy also has discovered recoverable reserves of 3.6 Bboe, compared to Croatia’s 241 MMboe.

“This is proof of how underexplored the Croatian side of the Adriatic Sea is,” Doric said. She later referred to vintage 2-D data spanning as far back as the 1970s and said, “We can surely say that on the northern part of the country there is a proven gas area, and on the southern part of the country there is a proven oil area.”

The Croatian advantage

Now that Croatia has a new hydrocarbons law in place, updated seismic data, and the investment security that comes with being a member of the EU, the country is ready to embrace the next phase of development for its oil and gas industry.

“I think that there will be no challenges,” Leveri? said, adding the country has enough qualified workers to support oil and gas projects. “Lots of Croatian workers work in all of the countries known for oil and gas, from Libya to Egypt, [Saudi] Arabia, and Norway. Everybody knows the Croatian workers.”

Besides having a competent workforce, Croatia has infrastructure in place, and the future could bring more improvements. The Adriatic oil pipeline system is in place to transport crude locally and abroad. There are oil refineries with pipeline, rail, and marine connections destined for central and eastern Europe. There is an existing gas transportation system and pipelines connecting offshore Croatia production to natural gas infrastructure in Croatia and Italy.

In addition, plans are for the Ionian-Adriatic pipeline to connect Croatia’s gas infrastructure to the future Trans-Adriatic pipeline. The country also will add to its underground gas storage capacity at a new facility.

Currently, Croatia imports gas, but the country aspires to one day become a net exporter of oil and gas.

“Croatia is now very important for energy security and diversification of gas coming from Croatia to the European Union,” Leveri? said, pointing out that the country’s strategic location also offers the deepest and northernmost port in the Mediterranean region.

Hilder added, “There was a large hiatus back at the end of the 1980s until now when there was little exploration. In fact, almost zero exploration was conducted offshore Croatia. It’s the perfect time to resurrect those exploration efforts and reenergize the offshore.”

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