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Serbia, Oil company NIS between sanctions, geopolitics and the envy of regional competition

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The goal of banning the transportation of oil of Russian origin through the Adriatic pipeline is to reduce the profitability of the Serbian oil company at a time when it is conquering the market of Bosnia and Herzegovina and other neighbors.

The persistence of the European Union to impose restrictions on Serbia in an important activity such as fuel supply is surprising. It is about the impact on everyday life, to which the citizens react quickly and strongly. European leaders certainly know what shortages and overpriced fuel lead to, just as they also know that there is absolutely no reason to punish Serbia.

Only one pipeline

However, it seems that the goal of banning the JANAF pipeline from transporting oil of Russian origin is not only a function of the American and European Union’s desire to use the war in Eastern Europe as a convenient moment to implement the plan. Apart from the citizens of Serbia, who will pay more expensive fuel, the burden of the Western initiative will be felt the most by the Serbian Oil Industry, an increasingly successful and profitable company after privatization.

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Let us remind you that Serbia has only one way to obtain oil, through the former Yugoslav and today Adriatic oil pipeline, the ban practically means that the local importer will buy oil of non-Russian origin. The problem is the price. On the market, Russian oil is cheaper by almost 25 percent. As the price of oil fluctuates from 86 to 103 dollars per barrel in recent days, Russia, pressured by sanctions, sells the energy product for 73 to 80 dollars. The difference is roughly $160 per ton. In recent years, Serbia has processed 3.95 million tons of oil, of which 900,000 are from domestic deposits. About 3.1 billion tons are imported, so the non-Russian oil market would mean spending 600 million dollars more. That would be an additional cost to the NIS, where all imported goods of this type end up.

More profitable derivatives

In contrast, with the investment of around 2.1 billion euros by the new owner, Gazpromneft, NIS modernized all segments of activity, from research to sales, “cleaned up” rivals on the domestic market and successfully focused on the surrounding area. For ten years now, the former loser has been a decently profitable company, its performance in Romania, Bosnia and Herzegovina and Bulgaria has been especially noted, while it is exploring deposits in Hungary.

The problem is the price. On the market, Russian oil is cheaper by almost 25 percent. As the price of oil fluctuates from 86 to 103 dollars per barrel in recent days, Russia, pressured by sanctions, sells the energy product for 73 to 80 dollars.

Perhaps the success of NIS is insufficiently known in Serbia, but the neighbors have noticed the expansion of the majority Russian-owned company. What is even more intriguing, the company does not base its development on foreign markets on the supply of fuel. On the contrary, it achieves success by placing more profitable derivatives.

Gas from the field near the Romanian town of Ċ½ombolja is used to produce electricity and sell it on the European market. With this business, NIS joined the European electricity exchange. In Bosnia and Herzegovina, the company is present with 38 pumps, while conducting research at two locations. It achieves success by placing finer and much more profitable derivatives, especially in the last three to four years, after the Pancevac refinery was modernized. The new technology enables finer and more expensive derivatives to be “extracted” from so-called “heavy” oil, which is less desirable for refineries. The same applies to 34 pumps in the western parts of Bulgaria.

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Both the kid and the buck

They noticed a boom based on more expensive derivatives in Croatia. Namely, during the joint Yugoslav period, the Zagreb company INA, with Slavonian wells and refineries in Rijeka and Sisak, was the leading Yugoslav oil company. She was particularly successful in the sales sector. It was two to two and a half times bigger than the former Naftagas, the forerunner of NIS, and better in every respect, from mining, through processing to the network of sales pumps and research abroad.

Of course, in Croatia, they expected a lot from the privatization of their son, and the state got involved in finding a partner and form of privatization. It seems that excessive state influence has been more of a hindrance than a help. Appetites have increased, so it was desired to get a lot of money for the sale of a minority part of the shares and to ensure further investments and development of the company. It turned out that he couldn’t do both the kid and the money.

When the Hungarian Mol acquired sufficient ownership and management rights through two purchases of shares, well separated in time, it stopped its investments. The company from Budapest has more profitable deposits than the ones in Slavonia, it didn’t know what to do with the Sisak refinery, so a decision was recently made to cancel it. A bigger shock for the public was the realization that the new owner has no ambitions to develop even the Rijeka refinery, which was considered the most developed in the former Yugoslavia.

Defeat in “own yard”

For years, the dispute between Mol and the Croatian state, in whose hands 49 percent of the shares remained. Zagreb often complained to Budapest, counting that Hungary, in order to preserve good relations, would suggest MOL, otherwise a private company, to invest in the Rijeka processor as well. There were also court cases that ended in international arbitration. Only two seasons ago, 15 years after privatization, Mol promised to modernize the Rijeka refinery. In two years, only a third of the work was done, and the end of the investment worth 520 million euros is planned for the fall of 2024.

Until then, the Rijeka processor and INA will be inferior to the modernized Pancevo refinery. The advantage will come to the fore in the Federation of Bosnia and Herzegovina, where INA has been the dominant seller for decades, often a monopolist. The defeat on “their” ground clearly hurt the oil companies and the country of Croatia. It is understandable that they wanted to regain positions. However, the way they chose is disturbing. Taking advantage of the chaotic war conditions in the east of Europe and the way of introducing sanctions, they took the side of those who punished Serbia, if they were not exactly the initiators. And that without a legal basis, only because the state, after condemning the Russian attack on Ukraine and refusing to recognize the Russian annexation of four Ukrainian regions made a political statement, decided to preserve military neutrality by not imposing sanctions against Moscow.

Spy soap opera

Envy towards the NIS is also visible in the news from Romania, which was heavily used by the media, that the NIS “disclosed the details of the research in Romania”. Allegedly, the managers of NIS petrol, the subsidiary of the company in Timisoara, disclosed sensitive information. In the following days, it turned out that it was an assessment of the amount of oil at the site, and the defendants were accused of sending the results to the headquarters in Serbia before the National Council for Mineral Resources approved the transfer. Eight experts were questioned, none of whom were Serbian citizens, four were detained.

Envy towards the NIS is also visible in the news from Romania, which was heavily used by the media, that the NIS “disclosed the details of the research in Romania”

Later it turned out that the inspection services of Romania, as soon as the war in Ukraine started, increased the number of inspections of NIS petrol several times. After several detailed checks of documents, everything ended with misdemeanor fines for minor omissions. As long as the constant control of the daughter company of the Russian-Serbian oil companies is somehow justified in the public’s mind.

When the eyes light up

Of course, Serbian opposition politicians also spoke up immediately. The alleged need to either support NIS or resell it to another owner and thus avoid the trap of sanctions that has been constantly being prepared for it since the shooting in the east of the Old Continent was mentioned again.

After ten years of Gazpromneft’s investment in the Serbian company and ranking in the leading position among the oil companies in the region, many people’s eyes light up as soon as they hear about NIS and now they would like to get closer to the successful company as an owner. Hence the constant criticism and inaccurate representation of the privatization of the oil company, NSPM reports.

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