Over the course of this year, global markets witnessed energy prices bottom out due to overproduction, economies stall due to the coronavirus pandemic, and the resulting reduction to the flow of goods and people leading to job loss. In a tough market, multilateral cooperation is necessary to withstand unpredictable exogenous shocks. The Three Seas Initiative (3SI)–a Washington-endorsed forum of 12 EU states between the Baltic Sea, Adriatic Sea, and Black Sea–stands as a successful example of using multilateral cooperation to build cross-border infrastructure, boost economic development, and expand access to modern energy services.
3SI countries include Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Through regional dialogue on various issues affecting the member states, 3SI is able to obtain funding for projects intended to improve the region such as integration and synchronization of the electricity system, gas interconnectors, gas transmission corridors, digital highways, railway modernization, pipelines, and energy storage facilities. The initiative was launched in 2015 by the Presidents of Croatia and Poland.
Energy diversification and security is at the forefront of issues for Southeast Europe. Natural gas is a new source of energy for many of these countries. However, some lack even the basic natural gas infrastructure. Due to the existing infrastructure in the region, the natural gas penetration rate is much lower than in other European countries. The region can currently cover 37% of its gas consumption internally, while the rest is predominantly imported from Russia. However, several countries, including Croatia and Romania, have the infrastructure to meet a significant proportion of national demand, while Bulgaria can meet a small proportion of local consumption. Croatia has recently taken steps to further improve domestic natural gas production.
Croatia’s liquefied natural gas (LNG) terminal on Krk island aims to secure the energy needs and increase security of gas supply through the provision of a new supply route for central and southeast Europe. The project includes two main parts: an LNG terminal on Krk island and gas pipeline Omišalj – Bosiljevo. Part one, the LNG terminal, will include the construction of infrastructure necessary for receiving, storing, and regasification of LNG. The maximum annual delivery is expected to be 2.6 billion cubic meters of LNG. Part two, the Omišalj – Bosiljevo pipeline, will consist of the installation of an 18 km pipeline. The pipeline will transport LNG from Krk island in the direction of Hungary. The project aims to connect the LNG terminal on Krk with central and eastern European countries.
Recently, significant progress has been made with the LNG terminal on Krk island. According to Plinacro, Croatia’s state-owned gas transmission system operator, the construction of the undersea section of the €57 million pipeline is nearing completion. The undersea section, stretching 750 meters, was laid on August 12, marking the end of the most complex segment of the project. To date, the entire pipeline has been dug and prepared, and almost 80% of the pipes have been installed. The Omišalj – Bosiljevo pipeline is projected to be completed by the end of 2020 and will have the capabilities to carry gas to Croatia once the LNG terminal is operational. Once completed, the Krk LNG terminal will have a capacity of 2.6 billion cubic meters per year as of 2021. In addition, the terminal will deliver gas to Slovenia, Italy, Hungary, Serbia, and Montenegro through the Croatian national transmission network.
According to Tomislav Coric, Croatia’s Energy and Environment Minister, LNG Croatia revenues are projected to surpass €100 million in the next five years. As the LNG Croatia, the company which runs the project announced, the terminal capacities are already locked in until the October 2027. Companies that have purchased capacities from January 2021 through October 2023 include Powerglobe Qatar LLC, MVM – Hungary’s state-owned energy group, the Croatian unit of Swiss-based MET Holding and Croatian’s INA and HEP.
The completion of the Krk LNG terminal is expected to increase the natural gas consumption in central and southeast Europe, along with an anticipated price drop of natural gas in Croatia. The LNG terminal is one of the key energy projects Croatia is working on and is valued at approximately €233.6 million. Additionally, €101.4 million in grants have been allocated by the European Commission.
With the next 3SI summit to be held in Tallinn in October, smart connectivity to be the focus of dialogue, the Croatian accomplishment of the near completion of the Krk LNG terminal will surely spark and reinforce the importance of the initiative. The project’s success can demonstrate that, when managed well, major infrastructure developments are within the realm of possibility for the region as it moves toward energy self-sufficiency, and will help revive and further build transatlantic cooperation in an economic period where such multilateral cooperation is most certainly needed.
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Dalibor Milos is a Board member at the Hybrid Warfare Research Institute in Zagreb
Jonathan Roberts is a Researcher at the Transatlantic Leadership Network.
Ariel Schwartz, Research Assistant at the Transatlantic Leadership Network, contributed to this article.