Adriatic Oil: Croatia Weighs Tourism Threat

By Reuters 2015-06-01 19:33:45

When Croatia announced in 2013 it would set a tender to explore for oil and gas in its pristine Adriatic waters, the government evoked the hydrocarbon riches of Norway to win over the plan’s many detractors.

“If it’s not dangerous for Norway or Scotland, it shouldn’t be dangerous for us,” Prime Minister Zoran Milanovic said in April, defending an effort he hopes could help turn around Croatia’s economic fortunes after six years of recession.

Milanovic was responding to public concerns that the project is a high-risk gamble that may forever change the way of life on Croatia’s more than 1,000 islands, hurt its lucrative tourism industry and harm the environment.

But with contracts expected to be signed with five selected concessionaires by July, opposition from local and international environmentalists, politicians and even pop stars, expressed in the campaign “SOS for Adriatic,” is only growing.

“It could be good if it means jobs for us on the platforms,” admitted Ivan Dominis, who handles tourist yachts in a small marina on the island of Dugi Otok, near a site being eyed for drilling.

Although the oil rigs must be at least 10km (six miles) away from the mainland and six kilometers (three miles) from any island, Dominis remained concerned.

“It doesn’t mean a disaster will happen, but only one incident is enough. We all live off tourism and fishing here. One spill and we’d never be able to clean the oil from the sea.”

Dugi Otok sits near Croatia’s Kornati national park, a nautical heaven of crystal clear waters strewn with dozens of small rocky islands and skirting one of the 10 planned areas of oil and gas exploration. Another area is near the famed medieval city of Dubrovnik.

Tourism in places like these has boosted Croatia’s image since the country of 4.3 million people broke from Yugoslavia in 1991. In 2014, the year after Croatia became the newest member of European Union, 12 million visitors generated around seven billion euros in revenues, or around 17 percent of national output.

But that has not been enough to keep the economy growing. Output has contracted by 13 percent since 2009, driving up unemployment to almost 20 percent.

The government hopes the country’s oil and gas potential can turn that around: preliminary studies suggest reasonably large amounts of natural gas in Croatia’s northern Adriatic, where it is already extracted, and oil in the south.

In January, Croatia awarded ten oil and gas exploration licenses: seven to a consortium of Houston-based Marathon Oil and Austria’s OMV, two to INA, co-owned by Croatia and Hungary’s MOL, and one to a consortium made up of Italy’s ENI and London-based Medoilgas.


Croatia produces around 600,000 tons of oil per year, barely 20 percent of its needs, and some two billion cubic meters of gas, or 66 percent of annual consumption. The government believes it can produce more, though how much more will only be known once exploration gets under way in the next three years, with exploitation not likely before 2019.

Similar plans are afoot in Adriatic neighbors Montenegro and Albania. Across the sea, Italy has been pumping oil and gas from the seabed for decades. Italy extracted 521,742 tons of crude oil from the Adriatic in 2014, or 69 percent of its total offshore extraction.

Economy Minister Ivan Vrdoljak told Reuters the government was banking on around one billion euros ($1.12 billion) of investment and several thousand jobs in the first three to five years. Contracts with the chosen companies would likely be signed by July, Vrdoljak said.

Milanovic, whose job will be on the line in an election around the end of the year, says Croatia has a “patriotic duty” to determine what resources it has at its disposal.

The project also fits with Croatia’s ambitions of becoming an energy power in the region, with plans also under way to build a liquefied natural gas terminal on the island of Krk.

“Croatia still hasn’t decided whether it wants to develop industry or live off its natural beauty,” said Igor Dekanic, an oil engineering professor at Zagreb University, who supports the project.

“Realistically, I think the danger level is low and, if some quantities of hydrocarbons are found, the benefits will outweigh the risks,” he said.

Critics appear determined to block the enterprise, no matter what the economic windfall might be.

Croatia’s opposition green party, Orah (Walnut), plans to petition the government in June with demands for a new environmental study and a public debate, backed by the main opposition HDZ.

Greenpeace and other eco-groups also hope to force a binding referendum against drilling, although a government plan to change the rules on how to collect the necessary 400,000 signatures is likely to put up serious obstacles to its success.

Marathon Oil told Reuters it planned to talk to Croatian residents and politicians to assuage their fears.

“We’ve demonstrated our commitment to protecting the environment across our operations and through experience working offshore in the Gulf of Mexico, North Sea, offshore West Africa, offshore Alaska and other areas,” it said in an emailed statement.

But Orah’s leader, Mirela Holy, said the Adriatic could not be compared to the North Sea or Gulf of Mexico.

“The Adriatic is a shallow and closed sea,” said Holy. “Just one disaster here and we could forget the entire economy in the coastal region.”

One of Croatia’s most popular singers, Oliver Dragojevic, said in March he felt compelled to speak out against the plan.

“We love our sea, we love to brag about it, let’s not destroy it. We are a country of tourism, not of oil.”

($1 = 0.8939 euros)


Deepsea Copper Mine Versus Terrestrial Mines

By Wendy Laursen 2015-06-01 19:22:26

Earth Economics has released an independent environmental and social benchmarking analysis of Nautilus Minerals’ proposed deep seabed mining project. The primary goal of the analysis was to measure the environmental and social impacts of the Solwara 1 project off Papua New Guinea in comparison with three terrestrial mines.

The report’s analysis is based on natural capital accounting and concludes that the Solwara 1 project has the potential to significantly reduce social and environmental impacts commonly associated with large surface terrestrial copper mines.

Specifically, the report compares Solwara 1 with three terrestrial mines: Bingham Canyon (Utah, U.S.), Prominent Hill (South Australia, Australia) and Intag (a proposed mine in Intag Province, Ecuador).

Solwara 1 is expected to be the world’s first commercial high-grade seafloor copper-gold mine project. The mine site is approximately 30km (18 miles) from shore in the Bismarck Sea in around 1,600m (5,000 feet) of water. The site has indicated resources of one million tons grading 7.2 percent copper, five grams (0.18 ounces) of gold per ton, 23 grams (0.81 ounces) of silver and 0.4 percent zinc. Inferred resources add 1.5 million tons of 8.1 percent copper, 6.4 grams of gold, 34 grams of silver and 0.9 percent zinc.

Global Demand

Regarding the market conditions for the project, the report findings include:

• World demand for copper continues to rise, with increasing global economic development, expanding renewable energy supplies (wind, hydro, wave geothermal, tidal power) and growing copper plumbing, electronics and communications sectors.

• Recycling is likely limited to around 35 percent of the supply of copper. Copper ore concentrations are declining. Environmental and social impacts of copper mining are rising.

• There is an urgent need to meet world copper demand while reducing fresh water use and contamination, damaging impacts to communities, mine footprints and CO2 emissions from copper mining.

• Seafloor mining has the potential to minimize the impact of copper mining by producing more copper with fewer natural capital inputs, fewer damaging outputs and a smaller area of impact.

Environmental Impacts

The proposed Solwara 1 project, when compared to the terrestrial mines, entails far less environmental and social impact and less short and long-term risks, says Nautilus.

The excavation and collection of mineralized material has been split into three individual tasks, which will each be carried out by a different seafloor production tool. The auxiliary cutter is designed as the pioneering tool which prepares the rugged sea bed for the more powerful bulk cutter. These two tools gather the excavated material; the third, the collecting machine, will collect the cut material by drawing it in as seawater slurry with internal pumps and pushing it through a flexible pipe to the subsea pump and on to the vessel via the riser and lifting system.

Terrestrial mines have significant impacts. Measured on the basis of impacts per ton of copper, the Solwara 1 project would outperform terrestrial mines:

• People will not be displaced by the proposed Solwara 1 project

• There will be no impact to food production

• There will be no impact to surface or groundwater fresh water supplies

• There will be no significant risk of disaster (e.g. mine tailing slide into communities)

• There will be no impact to pollination, soil formation, erosion, historic and cultural values

• The monetary damages (measured in terms of USD/year) resulting from terrestrial mines is estimated to be significantly more than that of the proposed Solwara 1 project (4 to 13 times per ton of copper produced for the three mines used in the comparison).

• The long-term mining liabilities for freshwater contamination, tailings and overburden failures that threaten downstream communities do not exist in Solwara 1.

Mike Johnston, CEO of Canadian-based Nautilus, said, “Growing copper demand requires our industry to look at more sustainable ways to meet this demand. As showcased in Earth Economics’ report, seafloor mining has the potential to not only provide economic benefits within the communities nearest to the operations while minimizing the impact of copper mining, it also has the potential to change the physical nature of the mining industry for the better.

“We believe that the proposed Solwara 1 project will launch a new frontier in the blue economy and resource sector. As the first publicly-listed company in the world to commercially explore seafloor mining opportunities, Nautilus is committed to leading the way and setting a high bar for developing an environmentally and socially responsible approach for the industry. Commissioning this report is part of our ongoing process to review, estimate and evaluate project impacts through objective third-party experts,” he added.

Purpose Built Vessel

It is anticipated that the proposed Solwara 1 project will commence operations in the first half of 2018 subject to project financing and completion of the company’s seafloor production equipment and vessel. The production support vessel is being built in China by Fujian Mawei Shipbuilding.

Marine Assets Corporation (MAC), a marine solutions company based in Dubai which specializes in the delivery of new build support vessels for the offshore industry, will own and provide the marine management of the vessel. The vessel will be chartered to Nautilus for a minimum period of five years at a rate of US$199,910 per day, with options to either extend the charter or purchase the vessel at the end of the five year period.

When completed, the vessel will measure 227m (750 feet) in length and 40m (130 feet) in width with accommodation for up to 180 people and generate approximately 31MW of power. All of the below deck mining equipment will be installed in the vessel during the build process to minimize the equipment integration to be completed following delivery of the vessel. The vessel is expected to be delivered by the end of 2017.

Dispute Resolved

In 2013, an arbitrator ruled in favor of the Canadian company in a dispute with Papua New Guinea over the ownership of the Solwara project after a nearly two-year battle.

Nautilus had accused the government of not coming through on its share of financing for the project, while the government had accused Nautilus of not fulfilling some of its obligations.

The report is available here.


Impact Study Delivered for Nicaraguan Canal

By Reuters 2015-06-01 18:16:03

A long-awaited study on the impact of the proposed $50 billion Nicaraguan waterway by a British consultancy has been delivered, a canal official said on Monday, the first major milestone since a symbolic groundbreaking six months ago.

The social and environmental impact study by the consultancy, Environmental Resources Management Ltd, will be discussed by an inter-institutional commission in June, before being voted on by the canal commission in July, Telemaco Talavera, spokesman of the government canal commission, said.

The 172-mile (278 km), Chinese-backed project, which the Nicaraguan government says will be operational by 2020, is one of the world’s most ambitious infrastructure schemes, but has been met with widespread incredulity.

Hong Kong-based HK Nicaragua Canal Development Investment Co Ltd (HKND Group), which is controlled by Wang Jing, a Chinese telecom mogul well connected to China’s political elite, owns the concession to build and operate the canal.

“In summary, ERM says that the project offers potential benefits for the environment and the people of Nicaragua,” Talavera told state media, without giving more details.

ERM spokesman Manuel Roman said on state media that the company was not for or against the project, adding that the study had highlighted the potential challenges of the scheme for the government and HKND to decide how to proceed.

After a chiefly symbolic groundbreaking ceremony in Managua last year, from which members of the international media were barred, Wang Jing said the environmental study would be finished by the first quarter of 2015, with excavation work beginning by the end of September.

Nicaraguan presidential spokesman Paul Oquist said in December that feasibility studies, including a McKinsey report that experts say will define interest in financing the canal, would also be ready by April.

In January, the U.S. embassy in Managua said it was concerned by a lack of information surrounding the canal, calling for all relevant documents pertaining to the project to be made public.

If completed, the canal could give China a major foothold in Central America, a region long dominated by the United States, which completed the Panama Canal a century ago.


Stranded Tanker Arrives in Port

By Kathryn Stone 2015-06-01 12:44:22

The disabled Afromax tanker Lady M finally arrived at the Port of Las Palmas Sunday after being stranded two weeks following an onboard fire.

The 115,418 DWT fuel tanker, owned and operated by Atlas Maritime, was carrying around 90,000 tons of fuel when a May 14 fire struck the vessel, disabling its engines. The incident occurred about 500 nautical miles off the Azores Islands.

Following the fire, the Lady M was denied entry into port until inspectors could determine the condition of the vessel and that it matched descriptions from the owner. According to European Union law, petroleum tankers are forbidden from docking in foreign ports without receiving prior permission. While ascertaining the exact situation onboard, the Coast Guard ordered the vessel to stay at a location about 60 miles off the Coast of Gran Canaria.

Greenpeace Spain expressed concern over this action last Friday citing that the Lady M was carrying 13,000 tons of oil more than the Prestige vessel, which in 2002 resulted in the largest oil spill for both Spain and Portugal. The organization urged Spanish authorities to permit the vessel entry in a nearby port to avoid any potential spill of the ‘dangerous cargo’.

Four tugs assisted in bring the vessel into the Port of Las Palmas Sunday and the port authority has reported that the hull is in very good condition and not at risk of spilling oil. On Monday the Lady M was subsequently transported to the Reina Sofia dock for repairs, which are expected to take between 10 and 15 days.

The vessel was traveling from the Perisan Gulf to Texas when the fire was reported and is set to resume course once repairs are completed.