EU Greenlights State Aid for Croatia’s Krk LNG Terminal

The European Commission has approved state aid for the construction and operation of Croatian liquid natural gas (LNG) terminal at Krk island.

Namely, the Commission explained that the plans are in line with EU State aid rules as the project would “contribute to the security and diversification of energy supplies without unduly distorting competition.”

“The new LNG terminal in Croatia will increase the security of energy supply and enhance competition, for the benefit of citizens in the region. We have approved the support measures to be granted by Croatia because they are limited to what is necessary to make the project happen and in line with our State aid rules,” Commissioner Margrethe Vestager, in charge of competition policy, said.

The measures, approved on July 31, would support the construction and operation of a floating LNG terminal, consisting of a floating storage and regasification unit (FSRU) and the connections to the national gas transmission network. The LNG terminal is designed to transport up to 2.6 billion cubic meters per year (bcm/y) of natural gas into Croatia national transmission network as from 2021.

The total investment costs to build the terminal amount to EUR 233.6 million, that would be financed through EUR 32.2 million from the LNG terminal company shareholders; EUR 101.4 million from the Connecting Europe Facility, which is centrally managed by the European Commission; and a contribution of EUR 100 million from the Croatian State budget.

In addition, Croatia will grant a tariff compensation called ‘security of supply fee’, which is financed by levies charged by the gas transmission system operator to gas users along with gas transmission tariffs, in case revenues from the terminal fees are not sufficient to cover operating expenses.

The KrK LNG Terminal has been included in the lists of European Projects of Common Interest since 2013, given its strategic importance for the diversification of natural gas supplies into Central and South-Eastern Europe.