September 14, 2016 / 5:55 PM / 3 years ago

Montenegro signs 30-year oil concession deal with Eni, Novatek

The logo of Italian energy company Eni is seen at an Agip gas station in Lugano, Switzerland June 3, 2016. REUTERS/Arnd Wiegmann/File Photo

PODGORICA (Reuters) - Montenegro on Wednesday signed a contract with a consortium of Italy’s Eni and Russian No. 2 gas firm Novatek, awarding it a 30-year concession for oil and gas exploration in the Adriatic sea.

The contract for four blocks covering an area of 1,228 square kilometers has been awarded in line with the terms of a 2014 tender, which initially covered an area of 3,000 square kilometers. Each of the partners will have 50 percent interest in the exploration licenses.

Montenegro, a small Balkan country and candidate for European Union membership, produces no oil but initial data has indicated it might have enough resources to cover its oil and gas demand.

“The signing of the contract will pave the way for the commencement of the oil and gas exploration,” said Milo Djukanovic, Montenegro’s Prime Minister.

Djukanovic said the country will set up a fund for oil and gas, adopting Norwegian energy model, based on which the country claims ownership over oil in its land.

Montenegro’s economy ministry had earlier said that exploration activities would be divided into two stages valued at 85 million euro ($96 million) and 12 million euro, respectively, with borehole drilling expected to begin this year.

The need for new energy sources is acute across the Balkans, a region that has lacked investments for nearly two decades due to the 1992-95 Bosnian war and political turmoil. ($1 = 0.8880 euros)

Reporting by Petar Komnenic; Writing by Maja Zuvela; Editing by Elaine Hardcastle

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