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Croatia launches new compressor station
PROJECTS & COMPANIES
Gas will come from a new LNG FSRU that Croatia intends to commission off Krk in 2021.
CROATIA has cut the ribbon on its first ever gas compressor station – a $31mn project that will allow it to pump gas to Hungary from a new LNG import terminal it is building on Krk Island.
A ceremony was held to mark the station’s launch on January 17, attended by Croatian Prime Minister Andrej Plenkovic and other top government officials. Addressing the ceremony, Plenkovic said the project would strengthen Croatia’s energy security and enable it to increase co-operation with Hungary and its other neighbours.
“This project also gives meaning to the LNG terminal project on Krk Island, which is of para- mount importance politically and strategically,” the PM said.
Croatia and Hungary are connected via a gas pipeline, but until now this link could only pump gas in one direction, from Hungary to Croatia. The new station, 50km south-east of Zagreb, makes it possible to flow up to 2.63bn cubic metres per year of gas in the opposition direction.
This gas will come from a new LNG floating storage and regasification unit (FSRU) Croatia
intends to commission off Krk in 2021. This $260mn project – the largest single energy investment in Croatia since its independence – will import up to 2.6 bcm per year of gas.
Croatia currently gets all its gas from Russia, with shipments averaging 2 bcm per year. The country wants to use the Krk terminal to diver- sify its supply base, as well as gain leverage in price talks with Russia’s Gazprom. It intends to re-export any remaining surplus gas to Hungary and its other neighbours. Design work is cur- rently underway on a pipeline to bring Croatian gas to Bosnia.
Both the compressor station and the Krk LNG terminal are listed by Brussels as projects of common interest (PCIs), granting them access to EU grants and fast-tracked approvals. The EU provided a €101.4mn grant to the Krk project, covering a good deal of its €233.6mn cost. An additional grant was provided equal to half of the cost of the compressor station’s construction, estimated at HRK209.5mn ($31.2mn). This sum also covers the laying of an 18-km pipeline to carry gas from the Krk facility further inland, which is still ongoing.
Risks for Russian gas majors as 2020 opens with low gas prices
PERFORMANCE
VTB Capital estimates that Yamal LNG’s contribution to Novatek’s net income might fall $0.6bn.
THE European and Asian gas prices have con- tinued their downward trend so far in 2020 and are now trading at historic seasonal lows of $3.50 and $4.10 per mmBtu (British thermal unit, or about 28 cubic metres) respectively, VTB Capital noted on January 21.
The analysts attributed the decline in prices to warm weather, high levels in underground gas storages and ongoing commissioning of new LNG facilities around the world and warned that the depressed price environment posed down- side risks for Russian gas majors Gazprom and Novatek.
VTB Capital calculates that Gazprom could lose as much as $3.3bn, or 13% of the fore- casted 2020 Ebitda, should the prices remain unchanged until the end of the year, while its dividend yield could drop below 5%.
“Although Novatek’s Ebitda is unlikely to be directly affected by lower LNG prices (the company simply resells Yamal LNG gas at a margin), Yamal LNG’s contribution to Novatek’s netincomemightfall$0.6bn,”VTBCapitalesti- mates, referring to the first operational LNG
facility of Novatek.
As far as the LNG market is concerned, the
US boosted LNG exports 67% year on year to 37.5mn tonnes in 2019, with 14.5mn tonnes going to Europe (against only 3.2mn tonnes in 2018), VTB calculated.
At the same time, total European LNG imports also soared 69% y/y to 86.8mn tonnes, from 51.3mn tonnes in 2018, while at the same time “Asia is becoming awash with LNG.”
Novatek is eyeing Asian sales with its Arctic LNG projects and could see a problem of LNG oversupply in the once premium Asian market.
“Some LNG importers in the region are even starting to re-export contracted LNG volumes (Japanese Osaka Gas utility has recently issued tenders offering two LNG cargoes from US Free- port LNG project for delivery in Europe in July and November),” VTBC warned.
For now, however, about 80% of total Yamal LNG capacity is contracted under long-term offtake agreements with some link to oil prices, which VTBC expects to limit the impact from lower spot gas prices.
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