The Anglo-Dutch supermajor is to begin talks on a potential concession with government officials in late February, the federation’s 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 is set to 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, US 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 between 4000 metres and 8,000 metres, could contain up to around 3.5 billion barrels of oil reserves, while northern beds are estimated at around 490 million barrels.
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.