Croatian government adopted on Wednesday a decision approving €234 million in funding for the first phase of the project to build a liquefied natural gas (LNG) terminal on the northern Adriatic island of Krk.

This initial phase includes building a floating storage vessel worth €160 million, and the building of the pipelines and plants for receiving, storing, reloading and re-gasification of liquefied natural gas, which is likely to cost an additional €60 million. The compensation for land plots used for the project will cost another €14 million.

The project includes €102 million in EU funding approved by the European Commission in 2017, with the government earmarking another €50 million for it in budget years 2019 and 2020 each. The remaining €32.6 million are to be provided by state-owned companies which co-founded the company intended to manage the future terminal, LNG Croatia – the national power board HEP and the gas supply network operator Plinacro.

Energy Minister, Tomislav Coric, said that the LNG project was of strategic importance for Croatia, and that it would contribute to the country’s energy independence and security.

“The building of the LNG terminal should be interpreted through its security component and through its geo-political significance for Croatia and for the European Union,” Coric said.

However, LNG Croatia has so far only received binding offers for the lease of some 520 million cubic metres of gas at the terminal, with two more conditional offers for non-binding lease of 300 million cubic metres, the company said in December. These fall short of the estimated 1.5 billion cubic metres of leased space required to make the investment profitable, while the terminal’s total capacity is projected at 2.6 billion cubic metres.

Coric said on Wednesday that the project would remain the government’s key energy project. As for possible additional leases, two letters of intent have been sent “from Hungary,” Coric said, enquiring about acquiring ownership stakes in the future terminal, he added, and that negotiations with interested parties would be held.

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