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August 2011

We introduce: Oil and Gas in Montenegro According to the Montenegrin Energy Development Strategy, it is estimated that there could be up to 7 billion barrels of oil deposits in Montenegro, and be up to 425 billion cubic meters of natural gas deposits present in the seaside area. Therefore, further research regarding these resources is necessary in order to prove their existence. During the last couple of years, the energy sector has become one of the most important and interesting sectors for the future development of the Montenegrin economy. Geological oil and gas explorations began in 1949 and covered the area including Crmnica and the Municipality of Ulcinj. A seismic surveys were carried out between 1973 and 2002 over a distance of 1,220km at depths of up to 5309 m. In addition, many studies, analyses and detailed expert reports have already been prepared. These analyses have shown the need for a new and intensive research program. If research results were to show the existence of natural gas, a system for supplying natural gas in Montenegro would develop much more quickly than as a result of any of the other options already present for importing energy resources. Gas supplies are envisaged in the future for the following cities: Podgorica, Niksic, Tivat, Bar, Budva, Cetinje, Kotor, Herceg Novi and Ulcinj.

Picture: Geological Promise

The search for oil and gas, along with the production cycle, consists of several phases: exploration, appraisal, development, production and abandonment. In order to start commercial activities it is necessary to have knowledge, technology and experience because this process requires a lot of investment. Montenegro does not possess the necessary technology, nor does it have experience of producing oil or gas. Therefore it will be necessary to carefully select the future explorer in such a way as to establish both long term and beneficial cooperation. The next step for the Montenegrin government is to publish a new call for proposals in order to find an investor who is both willing and able to take on the concession for exploring and producing oil and gas. Montenegro has definitely made an important step forward regarding the development, exploitation and usage of its resources.

An action plan for the period 2008-2012 was created on the basis of the Energy Development Strategy. It prescribes the following phases/ activities and government obligations. In order to achieve its planned activities, the Government has improved the legal framework as follows:

• The Law on Concessions was adopted in 2009; • The Law on Exploration and on the Production of Hydrocarbons was adopted in 2010; • Preparation of the Model for Concession Contracts has now started (including exploration work for the Concession Contract and for the Production Concession Contract). An exploration concession contract can be awarded to one or more bidders for a period of up to 2 years, whereas a production concession contract is awarded on the basis of exclusive rights for a period of up to 30 years. The exploration phase last 6 years for on-shore research and for 7 years regarding off-shore areas, with a possible extension period of up to 2 years. The production phase lasts for 20 years with a possible extension period of up to 10 years; • Two sets of fees are payable: acreage fees and royalty fees (for producing oil and/or gas). Fees for producing oil and/or gas are based

Activities of the Ministry of the Economy The Ministry of Economy published a tender for the research of possible oil and gas sites along the Montenegrin coast. Letters of interest were sent in by 18 world renowned companies. The bids will all be opened by the end of summer, 2011. Letters of interest were submitted by well-known oil companies from the following countries: Gazprom (Russia), Statoil (Norway), Total (France), ENI (Italy), Novatek (Russia), Naftna Industrija Srbije (Serbia), HESS Corporation (USA), Trajan Oil&GasEnergian Oil&Gas (Great Britain and Greece), Edison SpA (Italy), Geopartners Limited (Great Britain); TDE Services (Hungary); Hellenic Petroleum (Greece); Sterlin Energy PLC (Great Britain); Northern Petroleum PLC (Great Britain), INA (Croatia), and Premieroil (Great Britain). Interest in oil and gas research has also been expressed by the Hungarian company, MOL, which will soon establish a joint company with the Montenegrin state-owned company, Montenegrobonus.

The tender for the selection of the most advantageous bid for provision of consulting services for implementation of the tender procedure for exploration and production of hydrocarbons in the offshore of Montenegro was published in June 2011 by the Ministry of Economy. The deadline for the submission of letters of interest was July 22nd, 2011. The consultant’s main responsibility will be to help to move the whole process forward until a contract has been signed with the future concessioner. The tender for consultants has been announced several times, but there has been a need to further prepare both legal and sub-legal regulations in order to make the legal framework fall in line with the best of international standards. One more tender offer will be published by the end of the year regarding the exploration and exploitation of oil and gas in the Montenegrin coastal region.


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