Croatia - Energy

Summary

In early 2011, Croatia has begun implementing several projects proposed by the Energy Strategy for the period until 2020, which had indicated the need for a total of USD20 billion investment in new energy sector projects. Lacking its own financial and technology resources, Croatia will highly depend on foreign investors and equipment and services suppliers. Most of the key prospective buyers are still government-owned companies obliged to handle their procurement by public tenders. The best way for exporters to enter this market is through a carefully chosen local representative who has local contacts and a good understanding of local procurement practices.

Market Demand

Croatia imports over 50% of the total of about 300 PJ (petajoules) of energy consumed annually. It imports 80% of its oil needs, 40% of gas, 20% of electricity, and 100% of coal needs. Due to the expected three per cent annual increase of energy demand and the projected exhaustion of Croatia’s own oil and gas resources during the next ten years, its dependence on imported energy will continue to grow.

Croatia is scheduled to become a member of the European Union (EU) on July 1, 2013 and has already adjusted most of its energy sector regulations and development plans to enable smooth integration into the European energy market. In line with the EU approach, on October 16, 2009, Croatia’s parliament adopted a professionally-prepared and publicly-discussed Energy Strategy for the period until 2020. Adjusting Croatia’s energy policy with EU goals for 2020, the strategy addresses Croatia’s need for increased, diversified and sustainable supply of energy resources and improved energy efficiency.

In the electric power generation sector, the strategy has identified the need for construction of a total of about 3,500 MW of the installed capacity (the current total capacity is about 4,000 MW, of which about 1,100MW is in facilities at the end of their life-cycle). In the oil and gas sector, it has identified the need for construction of additional oil and gas pipelines, an LNG terminal and gas storages. Upgrades and modernization are also needed in the district heating sector. The estimated total investment in these projects exceeds USD20 billion (about USD2 billion annually). An estimated 60% of the investments would be needed in the electric energy sector, 30% in the oil and gas sector, and 10% in the district heating sector. Croatia does not have sufficient financial and technology resources for these investments and it will highly depend on foreign investors and equipment suppliers.

Market Data

To meet the estimated needs for additional installed capacity in the electric power generation sector by 2020, the strategy envisions completion of the three current projects and construction of new plants as follows:

250 MW gas-fired cogeneration plant in Sisak (in construction)
300 MW in several hydro-power plants (includes the most recent completion of a 42 MW plant in Lesce)
1,245 MW in numerous plants using renewable sources:
1,200 MW wind
140 MW biomass
100 MW hydro (small plants up to 10 MW)
45 MW solar
40 MW waste
20 MW geothermal
300 MW in several gas-fired cogeneration plants
1,200 MW in gas-fired plants
1,200 MW in coal-fired plants
Preliminary preparations for construction of a 1,000 MW nuclear plant will be renewed and should be completed by 2012 when the Croatian parliament will make the final decision on whether to go ahead with this project.

Following the strategy, in April 2010, the Croatian government approved a list of the top priority power plant projects to be carried by the state-owned electric utility company HEP during the next few years, including:

Gas-fired combined-cycle plant TE Sisak (230 MWe, 50 MWt) – in construction

Coal-fired plant Plomin (500 MW) – tender for selection of the strategic partner expected in 2011 Multi-purpose hydro-plant facilities on the Sava river (120 MW, 600 GWh)

Hydro-plant Ombla (68 MW, 223 GWh) – tender documentation is being prepared
Hydro-plants on Lika and Gacka river:

Hydro power plant Kosinj – construction of a new power plant, with installed capacity of 52 MW and electricity generation of 48 GWh
Hydro power plant Sklope – renovation of the power plant, with installed capacity of 27 MW and electricity generation of 68 GWh
Hydro power plant Senj – renovation of the power plant, with installed capacity of 240 MW and electricity generation of 576.4 GW h
Hydro power plant Senj 2 – construction of a new power plant, with installed capacity of 360 MW and electricity generation of 864 GWh

Two hydro-plants on Drava river (Molve 1 and Molve 2, 50 MW each)

In the oil and gas sector, the strategy discusses several possible major projects of regional importance that have been pending for many years and their implementation is still very uncertain:

LNG Terminal at the Adriatic coast
Construction of an underground gas storage (to be managed by Plinacro)
Druzhba-Adria pipeline project for exporting crude oil from Russia to the Adriatic Sea
Pan-European (PEOP) pipeline project for exporting crude oil from the Caspian Sea region over the Black Sea and through Romania and Serbia to Europe
Ioninan-Adriatic gas pipeline to connect to the Trans-Adriatic pipeline exporting gas from the Caspian Sea via Turkey and Greece to Italy

Following the strategy, in 2010, the Croatian government also approved a list of the top priority oil & gas sector projects to be carried during the next few years primarily by the state-owned companies JANAF and Plinacro, including:

reconstruction- expansion of storage area /tank farm of the Omišalj terminal
reconstruction- expansion of the storage area /tank farm terminal Žitnjak, Zagreb
construction of oil terminal Brižine
reconstruction- expansion of storage area/tank farm of the Sisak terminal
regional gas pipeline Kukuljanovo – Omišalj
construction of oil terminal Gaženica
underground gas storage Grubišno polje
submarine oil pipeline between the island of Krk and the mainland

Best Prospects

Key equipment for gas-fired (especially cogeneration) and coal-fired power plants
Key equipment for LNG terminals (off shore)
Key equipment for renewable energy plants (especially wind and biomass)
Nuclear power plant equipment and engineering services
Oil-pipeline and gas-pipeline equipment
Underground gas storage equipment

Key Suppliers

Local production of energy equipment and parts, although in decline during the last decade, is still strong and represents about half of the total market. Exports are estimated at about 10-20% of total production. Major local producers and construction/engineering companies include:

Koncar, d.d., Zagreb (transformers, generators, switches)
Alstom Power, d.o.o, Karlovac (gas turbines and parts)
Djuro Djakovic, d.d., Slavonski Brod (construction of electrical and petrochemical facilities, production of boilers and cylinders)
Siemens d.d., Zagreb (instrumentation and control)
Dalekovod, d.d., Zagreb (electrical grids)
Zagreb-Montaza, d.o.o., Zagreb (construction and engineering)
Enikon, d.d., Zagreb (construction and engineering)
Montmontaza, d.d., Zagreb (construction and engineering)
Monting, d.d., Zagreb (construction and engineering)
Tehnika, d.d., Zagreb (construction)
Hidroelektra niskogradnja, d.d., Zagreb (construction)
Monter, d.d., Zagreb (construction)

An estimated 40-50% of the energy equipment and technology (especially hi-tech) is imported. Major foreign competitors in the market include:

ABB Lummus Global (U.S./Netherlands/Czech Rep)
Siemens (Germany)
Alstom Power (France/Germany)
UOP (U.S./U.K.)
Foster Wheeler (U.S./Italy)
Parsons (U.S./U.K.)
General Electric (U.S./U.K.)
Shell (U.K.)
Ansaldo (Italy)
VA TECH ELIN Transformatoren (Austria)

Prospective Buyers
The Croatian energy sector is largely dominated by the following four, mostly state-owned companies:

HEP (electricity production, transmission and distribution; as well as heat supply and gas distribution)
INA (oil and gas exploration and production, oil processing, and gas, oil and oil products distribution)
Plinacro (gas transmission system operator)
JANAF (oil pipeline)

Market Entry

Because the key buyers are state-controlled companies that are obliged to handle procurement by public tenders, the best way for exporters to enter this market is through a carefully chosen local representative who has local contacts and a good understanding of local procurement practices. Simply sending catalogues and unsolicited offers to executives at these Croatian companies will not produce much in the way of results. The competition from local and European energy equipment and services suppliers is very strong, so contacts and market knowledge are key to succeeding in Croatia