Pipeline connection deal between Croatia and Hungary

Thu, 21 May 2009

THE CEOs of Plinacro and FGSZ, the gas subsidiaries of Croatia’s INA, and Hungary’s MOL, have signed an agreement to connect their gas pipelines by mid-2011 to further ensure a steady supply for the region and avoid a repeat of the gas crisis earlier this year. MOL is also the largest single shareholder in INA. The investment is worth $499.6 million, of which $95 million will come from Plinacro. “After we survived the gas crisis, we realized we have to think differently about gas. The aim of this new pipeline direction is to guarantee diversification and security of gas supply,” FGSZ’s Janos Zsuga said, speaking in Zagreb recently.

The Balkans were severely affected by the cessation of gas supplies caused by the dispute between Russia and Ukraine in January, prompting Croatia to look for alternative supply routes and speed-up plans for an LNG terminal. "The [energy] crisis demonstrated the need for regional co-operation, and this pipeline will enable this," Mr Zsuga said. The new pipeline will have a capacity of around 6.5bn cum/yr and will allow two-way shipments after an LNG terminal is built on the island of Krk in Croatia's northern Adriatic. "This project is of strategic value for the whole region: it will diversify supply and bring about higher stability of the gas system, and will also be used to connect (Croatia) to major international pipelines, like Nabucco," Plinacro CEO Branko Radosevic said. The LNG terminal, planned by a consortium of Croatian and European energy firms, will further improve supply security for the wider region, as it will be able to process more gas than Croatia needs. The new 294-km long pipeline will connect the village of Varosfold in Hungary with Slobodnica in Croatia. FGSZ will build the 206-km Hungarian section, while Croatia will construct its 88-km section.