Kirill Kravchenko for Reuters: NIS aims to expand, EU can help

April 24, 2013

A deal that opens the way for Serbia to join the European Union can help to boost sales and extend the reach of its oil firm NIS, majority-owned by Russia's Gazprom Neft, its CEO said. Serbia on Friday agreed to cede its last foothold in the former province of Kosovo and the European Commission, the EU executive, on Monday recommended talks begin on bringing Serbia into the European Union. Historically close to Serbia, Russia and its gas giant Gazprom have difficult relations with the European Commission, whose competition regulators are investigating possible breaches of EU antitrust laws in the gas market. But NIS CEO Kirill Kravchenko told Reuters he "stayed out of the politics" and was focused on the pragmatics of getting NIS into line with EU rules on fuel standards and low carbon energy. "Strategically, for sure it's positive for us. We are working in EU countries. The legislation will be on one basis. It's practical. It opens the borders more and more," he said. NIS, majority-owned by Gazprom Neft, Gazprom's oil arm, delivered a 22 percent rise in full-year net profit to 49.5 billion dinars ($593 million) through efficiency and higher output. The Serbian government, which has a minority stake, is looking to NIS to boost the nation's export earnings. . So far, NIS produces around 1.7 million tonnes of oil equivalent (mtoe) from fields in Serbia and has filling stations in Serbia, Bosnia and Herzegovina, Romania and Bulgaria. Production has doubled from 0.85 mtoe four years ago and NIS is aiming for 5 mtoe by 2020. At the same time, its goal is to increase the number of fuel stations to 800 from the existing 500 in four countries - Bosnia and Herzegovina, Bulgaria, Romania and Serbia - and is considering further regional expansion. Compared with the EU nations most affected by the debt crisis, such as Spain, and countries such as France and Germany, where new, efficient vehicles have cut fuel use, Kravchenko said the Balkan region, with an ageing transport fleet, offered potential for the refined products market. "For us, it's a little bit easier to survive," Kravchenko said. "But we still need to adapt." The company is investing 500 million euros ($654 million)annually, including the cost of an upgrade last year to its Pancevo refinery in Serbia, which can now produce EU-quality fuel, and has more upgrades planned. The other NIS refinery, Novi Sad, is being converted to produce industrial lubricants, which he saw as a more attractive market, given weak fuel demand. For Europe as a whole, Kravchenko assumes a 5 percent fall in oil use over the next 15 years. In Brussels, debate continues this week on a proposal to enforce an emissions goal of 95 grams of CO2 per km for new EU cars from 2020 through efficiency and reduced fuel use. The EU is also seeking to reduce emissions and improve energy security through more use of indigenous renewable supplies and it has a goal to get 20 percent of all energy from green sources, such as wind and solar, by 2020. NIS has decided buying into renewables is the best way to comply with EU low carbon rules On Monday, it acquired a 50 percent stake in the Serbian 102 megawatt (MW) Plandiste wind park project from the local renewable power developer Energowind. The project will cost 160 million euros, NIS said in a statement. It said it would set aside 23.5 million euros while the remainder of funds would be secured through a loan. ($1 = 0.7644 euros)