Croatia Among Countries Opening Doors To Oil, Gas Investors

HOUSTON—If Croatia’s geopolitical stability, fiscal terms and conditions and proven oil and gas provinces aren’t enough to lure potential oil and gas investors, perhaps the 37 unevaluated oil and gas shows in the country’s Pannonian Basin will hook them.

The oil and gas discoveries were among the data Marijan Krpan, president of the management board of Croatia’s hydrocarbon agency, displayed during this week’s NAPE conference to illustrate the potential for discoveries in the small European country off the Adriatic Sea. The hydrocarbon potential has already generated some buzz as the country continues to pitch blocks available for exploration and production part of two bid rounds underway.

“The Pannonian Basin is a very prolific one; it’s already confirmed. Since the Second World War to today, Croatia has produced more than 1.3 billion barrels of oil equivalent,” Krpan told Hart Energy.

He pointed out oil prospects in the Sava river basin area along the country’s northern border as well as gas and condensate ones along the Drava river basin farther south. “We still believe there is room for new discoveries by applying new techniques with better seismic with better resolution,” he said, noting existing seismic data is more than 50 years old.

As part of its second onshore bidding round, which began in September and ends in June, Croatia will grant E&P licenses for seven blocks—together spanning 14,272 sq km—in southwest and central Croatia and in central Slavonia. Oil and gas production has been happening in this area for decades.

However, companies have an opportunity to explore a frontier area with different geologic characteristics in Dinarides, a zone between the Adriatic Sea and Pannonian Basin, where four blocks are being offered in a recently launched bid round. It’s a thrust belt, so companies with experience in such geology are desired.

In all, Croatia is offering about 26,000 sq km of exploration acreage to investors. The country was among several showcasing acreage in hopes of lining up investors to carry out projects amid improved market conditions.

While many conference attendees lined the show floor of NAPE networking and learning about opportunities, representatives of countries such as Croatia, Israel and Australia among others highlighted international acreage in one theater. Meanwhile another group pitched U.S. opportunities in the domestic theater.

Krpan said its data room for the onshore round launched last year has been fully booked, generating interest from nearly a dozen companies so far. Companies include industry giants and small independent players, specialists in central and European plays and some from South America, he said.

Croatia awarded three companies a total of six licenses during its last bid in 2015. Canada-based Vermilion Energy Inc. scooped up four, while INA—which is co-owned by Croatia, Hungary’s MOL and institutional and private investors—received one. The other was awarded to Nigeria’s Oando Plc, but Krpan said the company ran into some problems and never signed the production-sharing contract.

Meanwhile, Vermilion and INA are progressing through the exploration phase.

“Vermilion is going to drill three exploration wells soon,” Krpan said. “INA has already drilled two wells; the last one had good results. They found a good volume of gas but unfortunately the water cut in production is very high, so they are trying to find a way to solve this technically.”

The block awarded to Oando—DR-3 in the gas province of Drava and near existing oil production—is being offered again. It’s the block that Krpan believes is the most attractive to companies.

Croatia’s 37 undeveloped oil and gas shows in the Pannonian Basin has already generated some excitement, said George Kovacic, president of Croscorp International Ltd.

“That’s what everyone wants—undeveloped discoveries. There are 37 of them identified,” Kovacic said. “This is an area that had its peak of exploration and development in the ’70s and early ’80s. Until now, all the work was done by former NOC INA. … But there hasn’t been much attention over the past three decades” as technology has progressed.

Croatia’s push to further develop its oil and gas resources comes as its domestic production declines. The country remains reliant on imports, as Krpan said indigenous production covers only about a fifth of Croatia’s demand. “We have to do something to incentivize exploration in order to prevent this further decline,” he said, later adding the country is also developing renewables—mainly geothermal.

Asked why should companies invest in Croatia given ample opportunities across the world, Krpan turned to the country’s geopolitical stability, membership in the European Union, good fiscal terms and conditions, and of course, the rocks.

“I do believe someone in the oil business can enter and develop a portfolio in Croatia. Why not?” he said.

Velda Addison can be reached at vaddison@hartenergy.com.