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News 29 Jul 15

Oil Firms Quit Croatia Over Montenegro Border Row

Austrian and US energy companies announced they have backed out of oil and gas exploration and exploitation in Croatia’s Adriatic Sea due to a maritime border dispute with Montenegro.

Sven Milekic
Oil platform. | Photo by Croatian Hydrocarbons Agency

Croatian economy minister Ivan Vrdoljak confirmed on Tuesday that Austrian energy company OMV and US firm Marathon Oil Corporation have decided not to sign contracts for to search for and extract gas and oil from Croatia’s Adriatic Sea, one of the country’s major energy projects.

The two companies made the decision because of a maritime border dispute between Croatia and Montenegro, just after another territorial dispute over contested waters between Croatia and Slovenia flared up.

“It is true; we will not conclude the negotiations with Marathon Oil and OMV. We could not accept the conditions set by the other party [Marathon Oil and OMV],” Vrdoljak said.

“In the background is the problem of the border with Montenegro; and it is true, it has been a problem from day one,” he added.

He said the companies initially agreed to a Croatian government proposal that suggested a bilateral memorandum with Montenegro would enable them to work freely despite the border dispute, but then informed Zagreb on Monday that they were pulling out.

The Croatian government gave OMV and Marathon Oil the licence for seven hydrocarbon exploration and exploitation zones in the central and southern Adriatic in January. Three of these zones are in waters disputed by the two countries.

The companies have already invested nine million euro in the project.

Croatia will now put the seven exploration zones out to tender again, but the process has already fallen behind schedule.

The contract signing was first scheduled for April, then postponed for June due to concerns raised by Croatia's maritime neighbours – Italy, Slovenia and Montenegro – and afterwards moved again to September.

Croatia launched the tender for hydrocarbon exploration and exploitation in the Adriatic along the Croatian coast in April 2014.

Apart from Marathon Oil and OMV'S seven licences, the Croatian-Hungarian firm INA obtained two and a consortium of Italy's ENI and British Medoilgas got one licence.

The licences for exploration are for two years, followed by a potential three-year extension, depending on an evaluation of the exploration activities. After the five-year process is complete, an exploitation concession for 25 years may be granted.

The Croatian government has said it expects that around 530 million euro will be invested by the companies involved.

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