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Press releases and law firm thought leadership

This page is dedicated to keeping readers informed of the latest news and thought leadership articles from law firms across the globe.

If your firm wishes to publish press releases or articles, please contact Shehab Khurshid on +44 (0) 207 396 5689 or shehab.khurshid@legalease.co.uk

 

Striving Towards the Black Gold

This article was written by Petar Mitrović, Partner ⃰, and Nikolina Kažić, Associate ⃰, and was originally published in Issue 5.2 of the CEE Legal Matters Magazine To see the original article, please follow this

The first upscale exploration of oil and gas in Montenegro started in 1914, when King Nikola Petrović approved the National Assembly's decision for oil exploration around Lake Skadar. The first well in the area of Crmnica dates back to 1922 – although it produced nothing of significance.

In later researches of the Montenegrin offshore, the existence of geological structures with the potential for hiding hydrocarbon deposits was confirmed. During the 70s and 80s, several American firms set up wells in the Montenegrin undersea area and confirmed oil and gas findings. However, no significant work was done pursuant to this confirmation, mainly due to the political and social instability of this Balkan country.

In the years that followed, and especially following the dissolution of the state union of Serbia and Montenegro in 2006, oil and gas exploration and exploitation formed the center of the Government's energy policy, and Montenegro made a significant effort to develop the industry. The country has defined its energy policy until 2030, adopted the Energy Development Strategy until 2025, and signed the Declaration of Accession to the Energy Charter in late 2012. The main objective of the adopted energy policy is the creation of an adequate legislative, financial, and regulatory framework to encourage private sector involvement and investments. Research shows that the total oil core potential in two separate submarine zones in Montenegro amounts to 12.5 x 109 tons. According to existing data, potential oil reserves amount to approximately 7 billion barrels, while potential natural gas reserves amount to 425 billion square meters.

Montenegro aims to follow the achievements of other countries in the Adriatic Sea that have valorized their potential in this field with around 1,500 exploration wells. Italy is the clear champion, with around 1,400 drilling sites. Neighboring Croatia drilled around 140 exploration wells and currently has 18 gas production platforms in the northern Adriatic.

As a sign of progress and the decisiveness of Montenegro to use its existing potential, the first tender for oil and gas exploration and production was announced in late 2013. So far, the Montenegrin Government has signed concession agreements with two consortia: the Italian-Russian Eni/Novatek (which was granted concession rights over four offshore blocks, covering 1,228 square kilometers), and the Greek company Energean oil & gas (which was granted two offshore blocks with a surface area of 338 square kilometers in shallow waters).

In the light of normative regulation, Montenegro adopted the Law on Exploration and Production of Hydrocarbons, the Tax Law on Hydrocarbons, and regulations governing the method of calculating compensation payments for oil and gas production, construction of exploration and exploitation plants, development and production of hydrocarbons, drilling, and so on. Additionally, the Government has adopted the model of the Concession Contract for the Production of Hydrocarbons, which is divided into two phases: the Exploration phase and the Hydrocarbons production phase.

The exploration phase may last for a maximum of six years for onshore or seven years for offshore blocks. Upon the concessionaire's request, and only in cases specified by law, the exploration phase may be extended for up to two years. However, the hydrocarbons production phase begins from the day of the commencement of the first extraction of hydrocarbons from the reservoir and lasts until the expiry of the deadline envisaged by the production concession contract, or a maximum of up to 20 years. The production phase may, at a request from the concessionaire, be extended at most for half of the duration of the production phase period specified by the production concession contract; i.e., for a maximum of 10 years.

With the Tax Law on Hydrocarbons, Montenegro made a plan to acquire revenue from companies doing business in the industry involving taxes and reimbursements for produced oil and gas. The strategy for acquiring revenue is progressive – meaning that the companies that have the most profit will pay an increased (progressive) rate for the produced oil and gas. In the period during the production of oil and gas, oil companies are due to pay a tax of 54% on the profit acquired from the exploration and production of oil and related assets, as well as 9% on dividends (i.e., capital gains).

The next tender for the exploration of oil and gas in the Montenegrin undersea area should open during this year or in 2019, since the Montenegrin Government is striving to introduce as many concessionaires as possible to the Montenegrin off-shore territory.

 

Independent attorneys at law in cooperation with Karanović & Nikolić.

Montenegro To Publish A Tender For A 200 MW Solar Power Plant

The Montenegrin Government plans to publish a tender for the lease of state land for the purpose of constructing a solar power plant in the municipality of Ulcinj. According to the announcement, the tender envisages a total of 6,621,121 square meters of land for the planning, construction, exploitation, and maintenance of a solar power plant at Briska gora, in the very south of Montenegro.

The plant is intended to have a total installed capacity of more than 200 MW, and will be completed in two phases. Phase one needs to be completed within 18 months after the signing of the contract, and phase two within 24 months after the first stage.

Offers to lease the land and build the power plant can be submitted by investors with proven experience in building solar plants with an installed capacity of at least 100 MW, and that have reported gross incomes of more than EUR 100 million in the past three fiscal years.

According to the Ministry's press release, the selected project is expected to sell electricity to the local grid through a long-term PPA on market terms.

Local press reports indicate that the project may require a total investment of EUR 300 million, and two potential investors have already submitted letters of intent to the Montenegrin authorities.

This will be the first tender for a large scale renewables project in Montenegro since 2010 and the awarding of "concessions" for wind parks Krnovo and Mo žura.

The Gas Pipelines, the Cold War and the Black Sea Region

Since the end of the Cold War, the Black Sea region has gained even greater political and economic importance and has become the subject of a dominance battle between world powers including the United States of America, Russia and the most influential member states of the European Union. While these world powers battle for dominance, local players such as Turkey and Ukraine have also gained importance and have used their geopolitical position to promote themselves as key international policy players.

 

Supporting Renewables in Serbia

Serbia is a contracting party to the Energy Community Treaty (ECT), signed in October 2005 between the European Union (EU) and nine South Eastern European countries. Since then, Bulgaria, Romania, and Croatia have ceased to be parties upon their accession to the EU and thus are no longer parties to the ECT, while Moldova and Ukraine have become parties to the agreement.

Energy and Infrastructure

Energy News: October 2010 

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