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Home > What we need to know? > Capacity booking

Capacity booking

The Open Season procedure, i.e. the implementation of a binding phase of capacity booking on liquefied natural gas terminal, is a process which intention is to determine the final interest in the terminal capacity booking, before making a Final Investment Decision. 

The Open Season procedure consists of several important stages, the first of which was the publication of the Rules for the implementation of the binding Open Season procedure (Rulebook) on 17 January 2018, during which the Rulebook was sent to all registered energy entities, while also given the opportunity for unregistered entities to join the process. This was followed by a call for tender for submission of binding offers in the first round of the Open Season procedure from 19 March to 8 April 2018. The first round of LNG regasification capacity booking, with one bid received in the amount of 100 million m³ over a 20-year period, resulted in a negative economic test. 

Following the results of the first round of capacity booking, as well as comments by potential terminal users, the second call for tender was initially postponed from 23 April 2018 to 20 December 2018. 

In the meantime, a new tender for the FSRU vessel of smaller capacity was published, which was more appropriate to the market situation in the Republic of Croatia and the region, and which significantly influenced on the reduction of capital costs related to the project implementation, as well as the cost of potential terminal users through reduced tariff. 

On 22 May 2018, a new Methodology for determining the amount of tariff items for the receiving and send-out of liquefied natural gas was adopted (Official Gazette 48/18). Some of the major changes within the Methodology are related to reduced costs in accordance with the newly announced FSRU tender, the possibility of booking LNG regasification capacities in different periods has been introduced, as well as the introduction of discounts when booking LNG regasification capacities depending on the years of booking and quantity, which is considered an additional incentive to apply for a longer term and a higher quantity, since this creates the possibility of contracting a significantly reduced tariff (up to a maximum of 10% savings). 

On 28 May 2018 public discussion with the interested public on the Proposal of the Rules of Operation of the terminal started, as potential users complained that the previously adopted Rules were non-transparent and uncertain for terminal users, and that all potential risks of terminal operation were not sufficiently detailed covered. The modification was made in accordance with the comments received from potential terminal users, thus significantly clarifying a number of procedures and provisions. The method of allocation and time scheduling of the LNG receiving and send-out service has been more clearly elaborated, the LNG quality specification has been specified, terminal losses have been allocated to the operator and terminal user, responsibilities for the minimum operational level of the LNG have been appropriately allocated and mutual relations of terminal users have been regulated, as well as relations between users and terminal operators regarding liability, payment security and changed circumstances. The calculations of the allowable losses of terminal gas have been simplified and the requirements for payment security under general conditions have been reduced, in accordance with the above-mentioned changes. Also, they have been copied to the Terminal Use Agreement as well as the Joint Terminal Use Agreement to the extent necessary. 

After the public discussion, LNG Croatia LLC harmonized the Rules in accordance with the comments received during the public discussion and obtained approval from the Croatian Energy Regulatory Agency (HERA). Following the approval of the final text of the Rules by HERA, the Terminal Rules of Operation were published in the Official Gazette before the start of the second round of the Open Season procedure. 

Until the deadline for submission of bids in the second round of the Open Season procedure for booking the terminal capacity, by 20 December 2018 LNG Croatia LLC received bids for a binding booking of terminal capacity totaling 0.52 billion cubic meters of gas. In addition to bids for binding capacity booking, conditional bids for non-binding capacity booking have also been received. 

LNG Croatia LLC has completed the procedure of contracting a binding booking of terminal capacity (Open Season procedure), which resulted in booking of 0.52 billion cubic meters. The economic test on booking 0.52 billion cubic meters of gas per year is positive in a way where indicative tariffs, which were part of the binding Open Season procedure, are retained. 

In the Methodology for calculating tariff items, grants are not shown as part of the capital costs of the project, therefore, economic test on a lower capacity booking than initially planned, keeping the same indicative tariff, is positive. Specifically, in addition to a grant from the European Commission amounting EUR 101.4 million, by the Decision of the Government of Republic of Croatia on the financing of the first phase of the project of floating liquefied natural gas terminal on the Island of Krk, which was adopted on 30 January 2019, a grant was provided amounting EUR 100 million, and therefore capital costs of the investment itself were mainly closed through grants.