ZAGREB, March 3 (Reuters) - Croatia and Hungary signed an agreement on Tuesday to connect their natural gas pipelines by mid-2011, to ensure a steady supply for the region and avoid a repeat of a gas crisis earlier this year.
The agreement was signed by the heads of Plinacro and FGSZ Zrt, the gas arms of Croatia’s oil concern INA INA.ZA HINAq.L and Hungary’s MOL (MOLB.BU). MOL is also the biggest single shareholder in INA.
The investment is worth 395 million euros ($499.6 million), of which 95 million will come from Plinacro.
“After we survived the gas crisis, we realised we have to think differently about gas. The aim of this new pipeline direction is to guarantee diversification and security of gas supply,” FGSZ’s Janos Zsuga told reporters in Zagreb.
The Balkans were severely affected by the halt in gas supplies caused by a row between Russia and Ukraine in January, prompting Croatia to look for alternative supply routes and speed up plans for a liquefied natural gas (LNG) terminal.
“The (gas) crisis demonstrated the need for regional cooperation and this pipeline will enable this,” Zsuga said.
The new pipeline would have an annual capacity of around 6.5 billion cubic metres and would allow two-way shipments after the LNG terminal is built on the island of Krk in Croatia’s northern Adriatic.
“This project is of strategic value for the whole region. It will diversify supply and bring about higher stability of the gas system, and will also be used to connect (Croatia) to major international pipelines, like Nabucco,” Plinacro Chief Executive Branko Radosevic said.
The LNG terminal, planned by a consortium of Croatian and European energy firms, should also improve supply security for the wider region as it will be able to process more gas than Croatia needs.
The pipeline will connect the village of Varosfold in Hungary with Slobodnica in Croatia. FGSZ will build the 206-km (128-mile) Hungarian section of the pipeline, while Croatia will cover the costs of the 88 km stretch in its territory. (Reporting by Zlata Zsolnay, Editing by Sue Thomas)