Croatia aims to complete a floating LNG terminal in the northern Adriatic in 2018 and initial capacity will be about 2 billion cubic meters per year (Bcm) of gas, Economy Minister Tomislav Panenic said on April 12.

"It does not mean we're giving up a land-based LNG terminal altogether, but at the moment we think that we can secure stability on the markets with a floating terminal," Panenic told Reuters in an interview.

Croatia's initial plans included a land-based terminal with an annual capacity of up to 6 Bcm of gas. Its target markets are central and eastern European countries.

Foreign investors, including some from the U.S., have voiced interest in the terminal on the northern Adriatic island of Krk and talks on financing details are expected to accelerate in the coming months.

Panenic said Croatia deemed the energy sector as one of the most important for boosting investments. It is the newest member of the EU, which posted growth of 1.6% last year after six consecutive years of recession.

"We hope that better use of the EU development funds and reforms to ease investments will bring growth of at least 2% this year," he said.

He said that within six to 12 months, Croatia aims to conclude legal changes to simplify and speed up investment procedures and ease costs, after complaints by businesses of too much red tape and high fees.

State-owned power board HEP plans to invest some 3.6 billion kuna (US$547.44 million) in updating facilities and boosting hydropower capacities, he said.

Panenic added the government could float between 10% to 25% of the company, "if we find a suitable partner which would help make HEP a major regional player".

He said the new center-right government, which took office in late January, also wants to revive talks with Hungarian energy group MOL on Croatian oil and gas company INA .

"I cannot guarantee if it will happen before the summer, but the government is working on its negotiation position. We want primarily to focus on investments and improving INA's business," Panenic said.

Croatia's capital Zagreb, which owns close to 45% of INA, and MOL, with an almost 50% stake, have been at odds for years over management rights and investment in INA. (US$1 = 6.5761 kuna)

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