The oil subsector consists of the extraction of domestic oil reserves in Serbia, the import of crude oil, the transportation of crude oil, the refining of oil derivatives, oil derivatives distribution, sales and its export. Domestic oil production has never been sufficient to cover local needs and Serbia has always been an importer of oil, with imports amounting to some 81% of its total annual needs. In addition, domestic production of oil and natural gas has been on the decline since 1996, mostly due to the low level of investment in the maintenance of domestic production, and the low intensity of exploration operations because of a lack of funds.
The oil transportation system includes the 154.4 km long section of the ex-Yugoslav oil pipeline from the river Danube on the Croatian border (the starting point of the pipeline is in Omišalj, Croatia) to oil refineries in Pančevo and Novi Sad. It is operated by the Public Enterprise “Transnafta”.
Serbia has two oil refineries both held by “Naftna Industrija Srbije” (“NIS”) (controlled by Gazprom). The original capacity of the domestic refineries was 7.8 million tonnes per year (4.8 million tonnes in Pančevo and 3 million tonnes in Novi Sad). Due to damage suffered during the NATO bombing in 1999, the operational capacity of Serbian oil refineries has been reduced to 6.6 million tons (4.8 million tons in Pančevo and 1.8 million tons in Novi Sad).
The majority of the Serbian oil and oil derivatives distribution network is held by NIS (some 480 outlets) while the remaining 800 are operated by private companies, including the Austrian company “OMV”, “Lukoil”, “MOL”, “Hellenic Petroleum” and others.
The construction of the Pan European Oil Pipeline (the“PEOP”) for the transportation of crude oil from the Caspian and Black Sea regions is starting from the Romanian port of Constantza and expanding through Serbia, Croatia and Slovenia to Trieste in Italy. The 200 km long Serbian section of the PEOP should enter Serbia at Bela Crkva, proceed along by Deliblatska peščara and then proceed by Pančevo and Novi Sad to Sotin which is along the border with Croatia and follows the route of the existing oil pipeline. In April 2007, all five interested states and the European Energy Commissioner signed a ministerial declaration on PEOP. In February 2008, a general meeting of the Interstate Committee for PEOP took the decision to incorporate a project development company, headquartered in London, England and the company was then registered in June that year. Its task will be to promote the PEOP and to attract investors interested in the project. Serbia appointed “Transnafta” to act as the founder of the project development company on its behalf.
The other project in the oil sector is the long-planned construction of the petroleum products pipeline system through Serbia with a total length of approx. 400 km (the “Petroleum Products Pipeline System”). The pre-feasibility study with a general design for the Petroleum Products Pipeline System is prepared. In November 2007, the pre-feasibility study received a positive evaluation by the Revision Commission of the Ministry for Infrastructure. At the end of January 2009 in Smederevo, the representatives of the Ministry of Environment and Spatial Planning, the Ministry of Mining and Energy, cities participating in the project, and “Transnafta” all signed a memorandum of understanding on the support of the construction project for the Petroleum Products Pipeline System.