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Croatia’s INA Oil Company, Caught Between al Assad and a Hard Place

As international pressure tightens against the regime of Syrian President Bashar al Assad, the Croatian national oil joint stock company Industrija Nafte (Oil Industry, or INA) is coming under increasing pressure to divest itself of its concessions in the increasingly civil war torn country.

But there’s a catch – Zagreb-based INA is a subsidiary of Hungary's Magyar Olaj es Gazipari Reszvenytarsasag (or MOL). MOL Group owns 47.16 percent of INA, the Republic of Croatia (represented by the Croatian government) - 44.84 percent and private investors - 7.9 percent.

With its 2010 revenue of $4.28 billion, INA is Croatia's largest company. INA’s website notes, “Today, INA is a medium-sized European oil company with a leading role in the oil business in Croatia and a significant role in the region in the areas of oil and gas exploration and production, oil processing, and oil and oil products distribution.”

According to Croatian Finance Minister Slavko Linic, INA would be the entity to decide about the possible sale of its Syrian hydrocarbon concessions, adding that MOL could not force INA to divest its interests before adding that INA’s management must accordingly implement whatever policy it deems best for the company.

The news follows last month’s announcement by MOL that INA further reduced its oil and natural gas output in Syria by about 1,300 barrels per day (bpd) on top of a 1,500 bpd cut in September from its previous level of roughly 7,900 bpd.

Why?

Well, Hungary is a member of the 27-nation European Union and Croatia hopes to join the EU next year, so has been adjusting its policies accordingly, and the EU's and European Commission’s tightening restrictions on Syria have had an increasingly negative impact on INA.

Even worse, INA is experiencing increasing difficulties in collecting its revenues from its Syrian partner for its share of hydrocarbon production.

But is INA gearing up to divest itself of its Syrian assets?

Not so, according to the company, which refuted an article entitled, “'MOL considering sale of INA's oil fields in Syria” in Croatia’s Jutarnji List daily newspaper, published on 18 January.

It’s not a minor investment, as INA’s Syrian oil field investments are worth an estimated $1 billion.

On its website under the heading “Main Line of Business” INA noted, “In last few years in Syria we had six commercial discoveries and there we produce natural gas, crude oil and condensate. The Hayan bloc in Syria is our most successful concession abroad in the history of the company.”

And what exactly does INA have in its Hayan concessionary bloc?

Six oil, natural gas and condensate fields - Jihar, Palmyra, al Mahr, Jazal, Mustadira and Mazrur, where INA began exploration activities in 1998 and which were completed in 2007.

A lot to walk away from.

INA released a statement commenting, “INA says it is not considering the disposal of oil and gas fields and such a possibility has not been discussed at any level of management. A potential major asset sale of this magnitude requires the support of both major shareholders of INA, the government of Croatia and MOL. Therefore, no single shareholder alone can consider such a business transaction," adding that INA supports the development of its Syrian project as "one of the most successful foreign projects in which (INA) significant financial resources and expert capacities have been invested."

On 18 January some Croatian media speculated that MOL wants to sell INA's Syrian oilfields to Russian partner Rosneft in order to weaken the Croatian company.

When queried about the situation, Croatian Minister of Finance Slavko Linic supported INA’s position, replying that INA had invested a great deal of capital in Syria and “MOL cannot get INA to sell the oil fields, because all people, even those from MOL-INA must pursue the policy of the INA to keep the funds invested and ensure that investment’s return. MOL may have another opinion but it must currently pursuing INA’s policy.”

When asked if the government would sit down with the Hungarians Linic replied that in the next few weeks the paramount issue was the people who will sit on the INA Supervisory Board, after which the government would then "have a very clear and transparent message for the people who will represent the government in INA.”

Linic repeated his suggestion that the government would seek to amend the INA shareholder agreement and his belief that MOL would agree to the proposed changes.

INA’s dolorous experience illustrates perfectly the perils of the “new” Eastern Europe, unevenly amalgamated into the European Union, nevertheless being subjected to hardball tactics from fellow former Soviet satellite states as well as the blandishments of Russian Prime Minister Vladimir Putin’s post-USSR Russian Federation buccaneering capitalist energy conglomerates.

Fueling the matrix’s complexity, when the pious pronouncements of Brussels are overlaid on top of the intricacies of the Middle East’s “Arab Spring,” well – the only certainty is that INA and MOL shareholders may have to wait awhile to see their profits from their investments.

By. John C.K. Daly of Oilprice.com




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