Montenegro to issue new call for offshore hydrocarbon exploration contracts

The Ministry of Energy and Mining of Montenegro plans to announce a public call for the awarding of concession contracts for hydrocarbon (oil and gas) exploration in the country’s offshore waters by the end of this year.

This was officially confirmed to “Vijesti” by the department headed by Minister Saša Mujović.

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The Montenegrin government launched its first tender for oil and gas exploration in the offshore area back in 2013. This led to the signing of two concession contracts, which were eventually terminated. The first contract was with the Italian-Russian consortium Eni-Novatek (signed in 2016), and the second was with the Greek company Energean (signed in 2017). That initial tender covered 13 exploration blocks spanning 3,000 square kilometers in the southern and eastern parts of Montenegro’s offshore area near Bar and Ulcinj.

• “The Ministry of Energy and Mining plans to issue a public call for awarding a concession contract for the exploration of hydrocarbons in Montenegro’s offshore area by the end of this year. In light of the European trend toward a green transition, the primary goal of this public call is to enhance knowledge about the hydrocarbon potential of Montenegro’s offshore waters, with a particular focus on identifying gas prospects. As the governmental body responsible for monitoring concession contracts for hydrocarbon exploration and production, the Hydrocarbon Administration is currently working on preparatory activities for issuing this public call,” the Ministry of Energy stated.

Although the Eni-Novatek consortium decided not to enter the second exploration phase after the results of the first exploratory well, thereby concluding the contract in 2022, the project was considered successful for Montenegro, according to the energy department. This consortium had four exploration blocks: 4118-4, 4118-5, 4118-9, and 4118-10.

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• “The data collected during the exploration, now owned by Montenegro, represent a valuable and useful foundation for future projects in the exploration of Montenegro’s offshore hydrocarbon potential. To remind, this concession contract resulted from the first public call for awarding a concession contract for hydrocarbon production in Montenegro’s offshore waters, announced in 2013. In this context, the government is not seeking concessionaires through direct communication with companies but expects interested companies to respond to the public call for a concession contract for production if announced. This would result in new concession contracts. We plan further exploration of Montenegro’s offshore waters in blocks not covered by the contracts with Eni-Novatek and Energean, and we believe that we will issue a public call for exploration by the end of the year,” the Ministry of Energy explained.

The government department clarified that the contract with Greek Energean was terminated in May of the previous year because the company did not meet the conditions for entering the second phase of exploration.

• “The concession contract for hydrocarbon production for blocks 4219-26 and 4218-30, totaling 338 square kilometers, was signed with Energean on March 15, 2017. The concession contract stipulated a total exploration phase of seven years, with two sub-phases of three and four years each. Energean, in accordance with the obligations defined by the contract for the first exploration period, completed 3D geophysical exploration of the offshore area in blocks 30 and 26 and processed the collected data. The condition for entering the second exploration phase and starting the drilling of an exploratory well was to find a partner, which they did not succeed in doing, and therefore the contract with this company was terminated on May 16, 2023,” the Ministry of Energy stated.

The Eni-Novatek consortium paid €12 million to the state budget in 2022, as per the guarantee for the unfinished part of the work defined by the exploration contract for oil in Montenegro’s offshore waters, due to their withdrawal from further exploration.

A savings fund only on paper

In the government’s plans for oil and gas exploration in Montenegro’s offshore waters, there was also the drafting of the Law on the Hydrocarbon Fund, intended to establish a special investment and savings fund where a portion of the revenue from taxes on the profits of companies engaged in oil and gas exploration in Montenegro’s offshore waters would be deposited.

According to the plans, 85% of the total revenue from this activity was supposed to go to the fund, with 15% going to the state budget.

The draft law on the hydrocarbon fund was supposed to be submitted to Parliament by December 31, 2014, which did not happen. Subsequently, the government, in mid-2016, proposed amendments to the law on hydrocarbon taxes, suggesting that instead of a separate law on the hydrocarbon fund, a regulation should be issued to establish it by December 31, 2017, at the latest. This executive branch’s intention to regulate the important issue by a lower act, which could be changed later, did not receive the green light in Parliament.

• “The postponement of the announced deadlines for drafting the law on the oil fund was due to logistical obstacles in the work process. The fact is that there are very few experts in this field on a global level, and we, in an effort to engage the most relevant experts and simultaneously provide the most optimal solution for Montenegro’s needs, decided to prioritize the quality of the final legal solution over the set deadlines. We have a policy paper that outlines the guidelines, principles, and objectives that should be defined by this law,” explained the Ministry of Finance when asked why the law on the fund was delayed.