The Pančevo oil refinery processed more than one million tonnes of crude oil and semi-finished products during the second quarter of 2026, marking a sharp operational recovery for Serbia’s most important fuel-production facility after sanctions disrupted crude deliveries and forced a temporary shutdown at the end of 2025.
NIS reported that gross refinery throughput reached 1.003mn tonnes during the three months to June, an increase of 19 per cent from the corresponding period of 2025. On the narrower Refining Block basis, excluding part of the consolidated processing attributed to HIP-Petrohemija, throughput amounted to 972,100 tonnes, up 18 per cent year on year.
The quarterly result is strategically important for Serbia because Pančevo is the country’s only crude-oil refinery and normally supplies around 80 per cent of the domestic fuel market. Its maximum designed capacity is approximately 4.8mn tonnes a year, making the second-quarter processing rate equivalent to an annualised utilisation level of roughly 84 per cent.
The recovery does not mean that NIS has returned to normal operating conditions. The company remains on the US Treasury Department’s sanctions list because it continues to be controlled by Russia’s Gazprom Group. Refinery operations, crude-oil procurement, banking transactions and deliveries through Croatia’s JANAF pipeline have depended on successive short-term licences issued by the US Office of Foreign Assets Control.
The licence covering operations at the end of the reporting period was due to expire on July 31, 2026. NIS submitted a further application on July 27 seeking authorisation to continue operating without interruption, but no new extension had been publicly confirmed by the time the second-quarter figures were released.
The refinery’s output therefore demonstrates technical and operational recovery but not yet structural security. Pančevo can operate at high utilisation when crude is available and financial transactions are authorised. Its vulnerability lies in the ownership structure, access to the JANAF pipeline, international banking channels and the willingness of suppliers and trading partners to transact with a sanctioned company.
NIS received the specific licence that enabled crude deliveries to restart on December 31, 2025. New crude reached the refinery in January, allowing production units to return to commercial operation after a shutdown lasting more than one month.
Management used the interruption to complete reliability work, including an overhaul of the S-4700 unit and replacement of the catalyst in the DC-4302 reactor at the diesel hydrotreating plant. Restarting the complex during winter conditions created additional technical risk, but the refinery returned to production according to the planned schedule.
The improvement became particularly visible during the second quarter. Pančevo processed approximately 336,000 tonnes in April alone, an increase of 11.3 per cent compared with March. Production subsequently remained at levels sufficient to support regular domestic supplies of diesel, petrol, aviation fuel, liquefied petroleum gas, bitumen and other petroleum products.
NIS processed 1.67mn tonnes of raw material in its Refining Block during the first six months. Imported crude represented 1.13mn tonnes, or approximately 68 per cent of the total. Domestic crude contributed 424,000 tonnes, while semi-finished products accounted for almost 115,000 tonnes.
The composition underlines the refinery’s continued dependence on external crude supply. Domestic oil production is strategically useful, but it is insufficient to maintain the refinery near its economic operating capacity. Access to imported crude through JANAF remains indispensable.
NIS has also had to modify its crude basket according to availability on the spot market. Sanctions restrictions, supplier caution and geopolitical disruption have reduced procurement flexibility and increased the importance of premiums, payment conditions and shipping schedules. A technically available refinery can still face lower margins when it has limited choice over the type, origin and timing of crude purchases.
Despite those constraints, the second-quarter recovery transformed NIS’s financial performance. The group generated sales revenue of RSD105.5bn during the quarter, up from RSD73.5bn in the same period of 2025. Quarterly EBITDA increased from only RSD1.7bn to RSD24.1bn, while the company moved from a net loss of RSD5.1bn to a profit of RSD7bn.
For the first half, revenue rose from RSD145.8bn to RSD171.7bn, an increase of almost 18 per cent. EBITDA more than tripled to RSD35.1bn, compared with RSD10.2bn a year earlier. NIS recorded a net profit of RSD9.8bn, reversing a loss of RSD3.6bn in the first six months of 2025.
The earnings improvement was not generated by throughput alone. Average Brent crude prices reached $92.60 a barrel during the first half, compared with $71.70 a year earlier. In the second quarter, the average price increased to $104.50, against $67.80 in the corresponding period of 2025.
Higher oil and petroleum-product prices increased nominal revenue, while lower-cost inventories accumulated before the price increase created a favourable margin effect when products were sold into a higher-price market. NIS has cautioned that this benefit could reverse as more expensive crude inventories pass through the refining and sales system during the third quarter.
That warning is significant. Refinery profitability depends on the difference between the cost of crude oil and the value of the petroleum products produced from it, adjusted for energy use, transport, processing costs and inventory timing. A higher oil price increases revenue but does not automatically improve margins. Profitability can weaken when crude procurement costs rise more quickly than regulated or market fuel prices.
The Serbian government has repeatedly intervened in the domestic fuel market through retail-price controls, temporary excise reductions and restrictions on exports. These measures can protect consumers during periods of disruption, but they also transfer part of the commodity-price and supply risk to NIS and the public budget.
The company’s cash flow illustrates the difference between accounting earnings and operational liquidity. NIS generated RSD16.6bn of positive operating cash flow during the first six months, compared with RSD1.7bn a year earlier. Second-quarter operating cash flow was slightly negative, however, reflecting working-capital requirements associated with rebuilding inventories and purchasing higher-priced crude.
Bank indebtedness declined to €364.9mn at the end of June from €515.6mn a year earlier, a reduction of almost 30 per cent. Lower debt improves the group’s ability to withstand short-term market disruption, but sanctions continue to limit access to international financing and dollar-denominated transactions.
NIS invested RSD11.8bn during the first half, slightly below RSD12.4bn in the corresponding period of 2025. Most investment was directed towards exploration and production, where capital expenditure increased from RSD6.9bn to RSD9.2bn.
Investment in downstream operations fell more sharply. Refining, sales, energy and petrochemical activities received approximately RSD2.2bn, down from RSD5.1bn a year earlier. Direct refinery investment declined from RSD2bn to RSD1.2bn, while sales and distribution investment fell from RSD2.3bn to around RSD600mn.
The reduction is understandable under sanctions and short-term licensing, but it cannot become permanent. Pančevo has received more than €1.4bn of investment since 2009, including more than €300mn for the delayed-coking Bottom-of-the-Barrel project. Those investments allow the plant to convert heavier feedstock into higher-value diesel, petrol, LPG and petroleum coke rather than producing larger quantities of lower-margin fuel oil.
Maintaining that capability requires continuous expenditure on rotating equipment, catalysts, fire-protection systems, rail infrastructure, loading facilities, process controls and environmental performance. NIS has continued several reliability projects, including the replacement of critical rotating equipment, reconstruction of industrial tracks, automation of motor-fuel loading and improvements to fire-suppression infrastructure.
Pančevo’s environmental obligations are also becoming more material. NIS prepared and verified greenhouse-gas emissions reports for the refinery and HIP-Petrohemija under Serbia’s new legal requirements. The verification process represents an early stage in bringing large Serbian industrial installations closer to European monitoring, reporting and verification standards.
This matters commercially as well as legally. Refining and petrochemical installations are highly energy-intensive, and their emissions profile will become increasingly relevant as Serbia aligns its industrial and climate framework with the European Union. Verified installation-level data will be necessary for future carbon-cost modelling, investment planning and the assessment of low-carbon technology options.
The downstream recovery was not matched by equally strong sales volumes. NIS sold 1.4mn tonnes of petroleum products during the first half, down about 8 per cent from 1.52mn tonnes a year earlier. Motor-fuel sales fell from 1.19mn tonnes to 1.09mn tonnes, while retail volumes declined from 514,200 tonnes to 441,200 tonnes.
Sanctions contributed directly to the reduction. Some corporate customers suspended or limited cooperation, international payment problems affected commercial relationships, and the company’s filling-station operations in Bulgaria remained temporarily suspended. NIS also began disposing of its businesses in Romania and Bulgaria, with completion subject to transaction conditions and OFAC approval.
Wholesale performance was more resilient. Second-quarter wholesale volumes increased to 343,200 tonnes from 292,100 tonnes a year earlier, helping offset lower retail and export activity. The company’s total second-quarter petroleum-product sales remained broadly stable at 807,400 tonnes, compared with 805,300 tonnes in 2025.
HIP-Petrohemija also improved its operational performance. Production increased by 11 per cent to 141,000 tonnes during the first half, while sales rose 20 per cent to 146,800 tonnes. The petrochemical company remained loss-making, but its net loss narrowed from RSD4.7bn to RSD1.5bn, and negative EBITDA improved from RSD4.1bn to RSD900mn.
The integration of HIP-Petrohemija with the refinery gives NIS an outlet for primary petrol and other feedstocks, but it also adds another energy-intensive and financially vulnerable industrial asset to the group. Petrochemical profitability will depend on feedstock costs, European polymer demand, plant reliability and the ability to complete overdue efficiency investments.
The larger unresolved issue remains ownership. Gazprom Neft and Gazprom together control 56.15 per cent of NIS, while the Republic of Serbia holds 29.87 per cent. The remaining shares belong primarily to minority investors, employees and former employees.
Hungary’s MOL Group reached a preliminary agreement to acquire the Russian-controlled stake, with a transaction value discussed in the range of €900mn to €1bn. Completion requires OFAC approval and the fulfilment of the agreed conditions between the Russian sellers, MOL and the Serbian government.
Serbia and MOL have separately negotiated the principles governing the company after the transaction. Serbia is expected to acquire an additional 5 percentage points, potentially increasing its ownership to approximately 34.9 per cent. That would strengthen the government’s influence over strategic decisions without requiring it to finance a full takeover.
MOL has also committed to maintaining Pančevo’s production at historically established levels. This condition addresses Serbia’s central concern: that a new regional owner might rationalise refining capacity across its network and gradually reduce the role of the Serbian plant. MOL already operates refineries in Hungary, Slovakia and Croatia, giving it considerable scope to optimise crude procurement and product flows across Central and Southeast Europe.
A MOL-controlled NIS could benefit from broader access to crude oil, regional logistics, trading capacity and banking relationships. Possible participation by the United Arab Emirates’ ADNOC as a minority investor could further diversify supply and provide additional commercial links to non-Russian crude.
For Serbia, refinery utilisation above one million tonnes in one quarter confirms that Pančevo remains a viable and strategically important industrial asset. It supports domestic fuel security, tax revenue, employment, petrochemical production and the country’s external trade balance. NIS calculated liabilities for taxes and other public revenues of RSD101.4bn during the first six months, underlining its fiscal importance.
The recovery remains conditional on temporary regulatory permissions. The refinery has demonstrated that it can restart safely, adapt its imported crude basket and operate near commercially efficient levels. A permanent ownership solution is now more important than another sequence of short licence extensions: without it, every crude delivery, financing arrangement and investment decision remains exposed to the next sanctions deadline.
