Start of construction of the 2nd Croatian underground gas storage facility

May 20, 2022 – The construction of the second Croatian underground gas storage facility is now underway after about sixteen very long years of discussions about it.

As Poslovni Dnevnik/Darko Bicak writes, after nearly sixteen years of discussions and construction plans for the second Croatian underground gas storage facility (PSP) Grubisno Polje (GP), the war in Ukraine and the energy crisis that ensued suddenly made these strategic facilities very desirable and deeply needed.

Although project activities began in parallel with the Russian attack on Ukraine in February, the start of work on the new Croatian gas storage facility was inaugurated a few days ago in Grubisno Polje by the new Minister of Economy and Sustainable Development, Davor Filipovic.

Unlike the existing “big” gas storage facility, PSP Okoli, with a capacity of around 550 million cubic meters of gas, PSP GP will be smaller, around 40 million m3, but it will be a storage unit flexible, or advanced.

The concession is relatively small, which in practice means that despite the large storage capacity, it will take a long time, especially if its occupancy drops below half, to release this gas into the Croatian energy system. The PSP GP will be developed in two phases and the total estimated value of the project is around 500 million HRK. It is estimated that the new Croatian gas storage facility could be operational by 2027 at the earliest.

Vlado Vlasic, the director of PSP, underlined that currently this project, both for PSP and for society as a whole, is the most important development and investment activity in Croatia.

“After a full 35 years since the commissioning of the Okoli storage facility, the PSP company, as the operator of the Croatian gas storage system, is building another Croatian gas storage facility. Today , as the whole of the EU grapples with the issue of providing people with the necessary energy sources, we are here to mark the beginning of the construction of a strategically important energy project.

Market Disruptions

In recent years, the energy market has become very flexible thanks to exchanges, allowing a secure and generally cheap supply of gas, oil and electricity from global sources. As a result, strategic gas storage facilities have become questionable, as was the case here in Croatia last year.

However, situations such as Russia’s aggression against Ukraine and the reaction of the West with the imposition of sanctions have called into question the security of supply and prices have increased several times. That said, the war in Ukraine will not last forever, and energy traders are aware of that.

Due to all these variables, it is almost impossible to estimate what the situation will be on the gas market by 2028, when the PSP Grubisno Polje will certainly be operational – both in terms of security of supply and price on the global market, and in terms of the growing energy transition in which there is less and less room for gas.

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Bonny J. Streater