RWE Withdraws from Croatia's Adria LNG Project

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Utility company RWE AG (OTC:RWEOY) (Essen, Germany) recently announced it will no longer be a part of the Adria LNG consortium that will set up a liquefied natural gas (LNG) regasification terminal at the island of Krk in Croatia. RWE currently has a 16.7% stake in the venture, and the partners in the consortium are utility company E.ON AG (OTC:EONGY) (Dusseldorf, Germany), with a 31.2% stake; oil and gas companies OMV AG (OTC:OMVKY) (Vienna, Austria) and Total SA (NYSE:TOT) (Courbevoie, France), each with a 25.58% stake; and natural gas company Geoplin d.o.o. Ljubljana (Ljubljana, Slovenia), with a 1% stake.

RWE made the withdrawal announcement after reviewing its global LNG business. The company intends to focus on expanding its presence in the LNG business of northern Europe. RWE said that it has offered all its shares in the LNG project to the other members of the consortium. The consortium said that RWE's shares will be distributed in accordance with procedures that were outlined when the joint venture was set up. Adria LNG added that RWE's withdrawal will not affect the implementation of the project.

The initial capacity of the terminal will be 10 billion cubic meters, which will be ramped up to 15 billion in the second stage. The final investment decision of the project is expected to be made in 2010. The project cost has been estimated at $1.2 billion. Construction is expected to begin next year, and the regasification terminal is scheduled to be operational from 2014. The Croatian government is preparing to conduct an environmental impact study, while the consortium is involved in obtaining a location permit for the project, which is expected to be ready by 2010. To increase Croatian presence in the project, three Croatian companies are soon expected to join the consortium: state electricity board HEP (Zagreb, Croatia), oil and gas company INA (LSE:HINA) (Zagreb), and gas pipeline operator Plinacro d.o.o (Zagreb). The three companies are likely to have a combined stake of 25% in the venture.

Although the non-Croatian members of the consortium have been trying to accelerate the progress of the project, Croatia has been slow in making decisions. The government has announced that the project is of utmost importance to the nation and will help increase the energy capacity of the country. The project holds strategic importance for the other companies as well, as the LNG terminal will enhance their presence in the LNG markets of Europe. The Adria LNG consortium intends to focus on the central and western European markets.

RWE has been expanding its LNG business during the past two years. In 2008, the company acquired a 50% stake in the LNG company Excelerate Energy LLC (The Woodlands, Texas). Excelerate owns a fleet of LNG tankers that have been specially designed to regasify LNG before delivery, such that gas can then be delivered directly into the pipeline network. The technology completely eliminates the need for onshore regasification terminals, such as those being planned by the Adria LNG consortium.

In another development, RWE acquired 100% of the shares of Essent NV (Arnhem, The Netherlands) and, in the process, gained access to an LNG regasification terminal under construction at Rotterdam. The terminal is being constructed jointly by oil and chemicals storage company Royal Vopak NV (Rotterdam, The Netherlands) and gas network operator NV Nederlandse Gasunie (Groningen, The Netherlands). Essent, and consequently RWE, has a 5% stake in the venture. Essent holds a 50% stake in another joint venture, through which Royal Vopak and Gasunie plan to build an LNG regasification terminal at Eemshaven in The Netherlands. According to RWE spokesperson Michael Rosen, the company has so far not made a decision about its role in the ventures setting up the regasification terminals at Rotterdam and Eemshaven.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.