Shell, Bosnia region to soon start talks on oil exploration

Mon Dec 2, 2013 10:46am EST

Related Topics

* Government to issue tender for consultants

* Deal expected to be signed at end of 2014

* Investment expected to $300 mln-$700 mln

By Daria Sito-Sucic

SARAJEVO, Dec 2 (Reuters) - Bosnia's autonomous Muslim-Croat Federation expects to start talks in late February with a unit of oil major Royal Dutch Shell on a concession for oil exploration, a minister said on Monday.

The talks with Shell Exploration Company, which start only after the government has picked consultants, are expected to last up to nine months, Federation Energy Minister Erdal Trhulj told Reuters.

"Bearing in mind the extent of the possible deal, we would be able to sign a contract awarding the concession to Shell at the end of 2014," Trhulj said. "This is an enormous endeavour that has never before been conducted in Bosnia.".

The investment will range between $300 million and $700 million depending on the number of drilling sites, he said.

After the 1992-95 war, Bosnia was split into two autonomous regions, the federation dominated by Muslim Bosniaks and Croats, and the Serb Republic. Each has a right to use natural resources on its soil without consulting the other region.

Before the war, U.S. and British researchers identified five potential oilfields in the Muslim-Croat Federation and possibly as many in the Serb Republic.

The federation government approached Shell in 2011 after deciding to revive oil and gas exploration plans based on the pre-war research.

A two-year preliminary deal signed in November 2011 tasked Shell with developing a data room.

In September this year, Shell expressed interest to get a concession in three areas containing possible deposits, but the government agreed only to a concession in the Dinaridi area, stretching from the town of Bihac in the west to the Adriatic town of Neum in the south.

Experts say that southern deposits, located at a depth of 4,000-8,000 metres, could contain up to 500 million tonnes of oil reserves, while northern beds are estimated at around 70 million tonnes.

The Serb Republic in 2011 awarded a concession for exploring potential oilfields to Jadran Naftagas, a joint venture between Russia's Neftegazinkor, a unit of state-owned Zarubezhneft, and Serbian oil firm NIS, majority-owned by Russia's Gazprom Neft .

The company started drilling last June as part of a $41 million investment in the first exploration phase but has so far reported no significant findings.

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