They would search for oil in the sea again

Two concession contracts for oil and gas exploration with the Italian-Russian consortium Eni-Novatek in 2016 and with the Greek company Energean in 2017 did not yield results

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Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

By the end of this year, the Ministry of Energy and Mining plans to issue a public call for the award of a concession contract for hydrocarbon exploration (oil and gas) in the Montenegrin seabed.

This was officially told to "Vijesta" in the department headed by the minister Saša Mujović.

The government launched the first tender for offshore oil and gas exploration in 2013, which led to the signing of two concession contracts that were eventually terminated - with the Italian-Russian consortium Eni-Novatek (concluded in 2016) and with the Greek company Energean (concluded in 2017). In that research tender, there were 13 so-called blocks with an area of ​​3.000 kilometers in the southern and eastern part of the Montenegrin sea near Bar and Ulcinj.

"The Ministry of Energy and Mining plans to issue a public call for the award of a concession contract for hydrocarbon exploration in the Montenegrin sea by the end of this year. Bearing in mind the European trend of green transition, the main goal of this public call is to increase the level of knowledge about hydrocarbon potential in the Montenegrin seabed, with special emphasis on the identification of gas prospects. As a state body whose primary activity is the monitoring of concession contracts for the exploration and production of hydrocarbons, the Directorate for Hydrocarbons is currently working on preparatory activities for the announcement of this Public Call", said the Ministry of Energy.

Although concessionaires Eni and Novatek decided after the results of the first exploratory well not to enter into the second exploration period, which ended this contract in 2022, for Montenegro this project was, as they claim in the energy department, a success. That consortium had four exploration blocks 4118-4, 4118-5, 4118-9 and 4118-10.

"The data collected during the research, which are owned by Montenegro, represent a valuable and more than useful starting point for future projects in the field of research into the hydrocarbon potential of the Montenegrin seabed. As a reminder, this concession contract was the result of the first public call for the award of a concession contract for the production of hydrocarbons in the Montenegrin subsea, which was announced in 2013. In this sense, the Government is not looking for concessionaires in direct communication with companies, but it is to be expected that, if the Government announces a public call for the award of production concession contracts, interested companies will come forward, which would result in a new concession contract. The plan is to further explore the Montenegrin sea on blocks that were not included in the Concession Agreement with Eni-Novatek and the Concession Agreement with the company Energean, and we believe that by the end of the year we will issue a public invitation for exploration", they said to the Ministry of Energy.

This government department clarified that the contract with the Greek Energean was terminated in May of last year because they did not meet the conditions for entering the second phase of research.

"Concession agreement for the production of hydrocarbons for blocks 4219-26 and 4218-30 with a total area of ​​338 km2 was concluded with the company Energean on March 15, 2017. The concluded concession contract stipulates that the research phase lasts a total of seven years, with two research periods (sub-phases) of three and four years each. Concessionaire Energean, in accordance with the obligations defined in the contract for the first research period, completed the 3D geophysical survey of the seabed on blocks 30 and 26, as well as the processing of the collected data. The condition for entering the second phase of research and the start of drilling an exploratory well was for the concessionaire to find a partner, which they failed to do, and therefore the contract with this company ended on May 16, 2023," said the Ministry of Energy.

The Eni-Novatek consortium paid 12 million euros to the state budget in 2022 as a guarantee for the unfinished part of the work defined by the contract on oil exploration in the Montenegrin seabed due to the abandonment of further exploration.

Savings fund only in papers

The Government's plans for oil and gas exploration in the Montenegrin seabed included the adoption of the Law on the Hydrocarbon Fund, which was supposed to establish a special investment-savings fund into which part of the tax revenue will be poured based on the realized profits of companies that receive work for exploration. oil and gas in the Montenegrin seabed.

According to the plans, 85 percent of the total income from this work should belong to the fund, and 15 percent to the state budget.

The draft law on the hydrocarbon fund was supposed to be in the Parliament by December 31, 2014, which did not happen. After that, in mid-2016, the Government established amendments to the hydrocarbon tax law and proposed that instead of a special law on the hydrocarbon fund, a decree would be adopted according to which it would be formed by December 31, 2017 at the latest. That intention of the executive power to regulate an important issue with a decree, as a lower act, which it could change later, did not get the green light in the parliament.

"The postponement of the announced deadlines for drafting the oil fund law was due to logistical obstacles in the work process. It is about the fact that there is a very small number of experts in this field at the global level, and we, in the desire to hire the most relevant experts and at the same time, provide the most optimal solution for the needs of Montenegro, decided to put the quality of the final legal solution ahead of the set deadlines. We have a policy paper (a public policy that should be transposed into law) which specifies the guidelines, principles and goals that should be defined by this law", was the explanation of the Ministry of Finance when asked why the adoption of the law on the fund is delayed.

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