Interview

This year has been a year of stabilization

01.10.2021

Interview with Kirill Tyurdenev, CEO of NIS with daily “Politika”

After a difficult last year in which the price of oil dropped to historic low, and the sale of petroleum products practically halved due to the coronavirus pandemic, global and domestic petroleum companies have begun to slowly recover. This is also shown by their business results for the first six months of this year. But, they’re still far from being able to say that the crisis is behind them.

– Last year, in March and April, the sales of petroleum products were up to 50% lower. However, we managed to stop the further decline and return to the pre-crisis period. The situation in the upcoming period depends on the oil prices movement on the world market, as well as on the relationship between supply and demand. Due to the overall pandemic circumstances, business plans with different scenarios are being adopted to adapt to the given conditions. Plans are based on macroeconomic assumptions, as it is difficult to predict further movements of crude oil prices. Also, we continued with the program of measures for increasing operational efficiency and cutting costs, which is why we can say that, for NIS, the year of 2021 has been a year of stabilization, says Kirill Tyurdenev, CEO of the NIS j.s.c. in an interview with Politika.

You’ve recently informed us about NIS’s business results for the first six months of this year. They are significantly better than last year’s, when the price of oil was at a historic low. How did you achieve these results and does that mean the crisis is over? 

NIS’s net profit amounted to slightly more than RSD 6 billion for the first six months of this year, which is a much better result than last year. EBITDA (profit before paid interest, profit tax and depreciation) amounts to RSD 22.2 billion, which is an increase of almost 10 times compared to the same period in 2020. Two factors contributed to the achievement of better results. On the one hand, a rise in oil prices and recovery in demand, and on the other hand, the measures we have taken to improve efficiency and reduce costs.  Our business model is yielding results and we will continue with the programme of measures that has proven successful in the crisis.

What are the priorities of NIS for the next year – its further modernization of retail, refineries…?

It is important to point out that, despite everything, we continue with further development and investments. There are three main directions of investment. In the field of oil and gas exploration and production, principally, we aim to produce the planned quantities of oil and gas. We are working on mature oil fields and oil production in our deposits requires large investments.

Second, at the Pančevo Oil Refinery, we are carrying out technical analyses and preparing for the process of modernization of the catalytic cracking plant, which is another form of modernization of the refinery that will increase our competitiveness when it comes to production of components for motor fuels and raw materials for petrochemicals.

The third main direction of investment is the modernization and development of our retail network. We plan to finish the construction of four new and reconstruct six old petrol stations in Serbia this year. In addition to that, in the company, we have been implementing several projects aimed at increasing operational efficiency, since NIS needs to change in response to global challenges in our industry.

What exactly do you mean?

First, the increase in efficiency, which is reflected in the change of internal regulations in the company, enhanced procedures of making key decisions, reducing bureaucracy, digitizing numerous processes…We are also implementing a digital transformation of the company, which we perceive as a tool to achieve our strategic goals in a time of extremely rapid technological changes.

What are the chances of you becoming the owner of HIP Petrohemija?

The tender for privatization of Petrohemija was called for on September 9th and we are now analysing the documentation. NIS and HIP Petrohemija are long-term strategic partners and NIS are aware of the importance that Petrohemija has for the economy of the Republic of Serbia. But at this point, with the ongoing privatisation process, we are unable to comment on the process in more detail.

NIS produces straight-run gasoline, which is the basic raw material for the operation of Petrohemija. Why is Petrohemija important for NIS?

Our oil refinery and HIP Petrohemija are technically and technologically connected. We deliver straight-run gasoline produced in the refinery through pipelines to Petrohemija, which continues to use it as a raw material. Also, at this point, we are a minority shareholder of Petrohemija.

You are the most successful company in Serbia and the largest budget provider. How much money does NIS transfer to the budget each year?

It is true that NIS is one of the largest budget providers in Serbia. More than 1.1 billion euros are paid annually to the Serbian budget through paid taxes, or about 15.3 percent of the total tax revenues of the budget of the Republic of Serbia on an annual basis.

Excise duties in Serbia are the highest in the region. That is determined by the state, but is that why fuel is almost the most expensive in Serbia?

The world oil prices have the biggest impact on the price of petroleum products. We import three-quarters of the total processed quantities in the refinery. In addition to world oil prices, exchange differences affect the price of petrol and diesel as well. When it comes to excise duties, we respect all the rules of the country in which we operate.

Speaking about opening new petrol stations, will there be a charging station for electric cars?

There are charging devices for electric cars at some of our stations on the highway and they are already available to drivers. We intend to evolve in this direction, as the demand for this type of service develops.

Have you found any new oil deposits in Serbia or Romania, and where else do you exploit black gold?

Every year, depending on the investment program, we drill between 40 and 60 wells in Serbia. Furthermore, we are now developing an oil deposit in the western part of Romania and the first quantities of oil produced there have been delivered to the Pančevo refinery. Besides, we are also implementing research projects in the Republic of Srpska on the territory of Bosnia and Herzegovina.

You are also engaged in the production of electricity.

So far, we have implemented a cogeneration program on eight oil and gas fields in Serbia, i.e., the construction of small power plants producing electricity. Earlier, gas was burned on torches, and now we use it in turbines to produce electricity. At the same time, we are finalizing the project for the construction of TE-TO Pančevo thermal power plant. The basic power of this plant is 200 megawatts. This project is being implemented in conjunction with Gazprom Energoholding.

Do you use the electricity you produce from the gas for your needs, or you sell it as well?

We use part of the electricity for our own needs, and we sell part of it. We are also engaged in electricity trading. Just as we buy, so too we sell. In this segment, NIS is present in the markets of Serbia, Bosnia and Herzegovina, Romania, and Bulgaria, and we also trade on the borders with Hungary, Croatia, Slovenia, North Macedonia, and Montenegro. Last year, we produced 69 GWh of electricity, and the sales volume is 320 GWh.

You’re also a socially responsible company. You help young people a lot…

Since 2009, we have invested more than 4.1 billion dinars in socially responsible projects. The main directions of investment are supporting young people, investing in the development of local communities, improving the quality of education. We also support scientific institutions and schools, the development of culture and art, sports for children, and professional sports… We have two basic programs that are constantly evolving. One of them is the “Common cause Community” project through which we cooperate with the local communities we operate in, and with different ministries as well. At the moment, we are cooperating with 12 local communities, and we have allocated RSD 107.5 million for the implementation of environmental projects in 2021.

The other programme we are proud of is “Energy of Knowledge”. In this program, we establish cooperation with both Serbian and international scientific and educational institutions. So far, we have funded 130 Serbian students of faculties in Serbia and the Russian Federation, and the company employs more than 50 scholarship holders. This is of great importance because if the company is to be modern and competitive, we need highly qualified staff who will spread their energy.

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