Croatia, Serbia & Russia exclusive: The story on oil refineries and investors Gazprom and MOL, the report

Published on 15. January 2014., SEE Energy News

While Croatia is faced with MOL plans to close both INA refineries and tries to negotiate the best solution, in Serbia in the national oil company with the Hungarian partner, some still have a problem as the most successful Serbian company NIS , which modernizes refineries, expands in the region. Hungarian MOL anticipated closure of an oil refinery in Sisak already in 2014. and the closure of refineries in Rijeka in 2018 in its development strategy of Ina, says these days the Croatian press.

In our neighboring state politicians, analysts and economists comment on what will happen with the Croatian national oil company INA Group, whose fate is more uncertain because of the scandal with former Croatian Prime Minister Ivo Sanader and his alleged bribes from the Hungarian oil company MOL, in the time when the INA privatization model was accorded.

There is no need to be an economic expert to conclude that all of this, if indeed it happens that MOL sells its stake in INA, will quite shake the company activities and its position in the oil business in Croatia.

In Serbia, at the same time, some of them seemed to be bothered that  hither national oil company is the company that operates successfully both  in Serbia and the region. Again starts talking about the alleged bad privatization of the Serbia Oil Industry, with the emphasis that the amount received when selling of 51% of the capital, of the 400 MEUR, is low price and that Serbia is at a loss because NIS pays mining rent by only three percent.

In all these criticisms there is no words that the NIS Serbian Business Registers Agency (SBRA) on 6. June released a report “The hundred best… companies” according to which the NIS is the most successful local company. According to SBRA, the NIS was in the first place last year with 2 billion EUR in the income operating.

Two weeks ago, on 20. November Petroleum Industry of Serbia was declared the most successful Serbian company with consolidated profit in the list of BUSINESS TOP 2012/2013, special publication of Business & Finance magazine, dedicated to business enterprises in Serbia and economic trends in the world, Europe and the region.

All these critics forget that the NIS co-owner, in addition to Russian Gazprom Neft, still belongs to Serbia and Serbian citizens – who received free shares – but did not sell them – and a number of those who in the meantime have bought shares of this company on the Stock Exchange. Nor that the NIS this year paid a dividend to shareholders, that last year was completed the modernization of oil refineries in Pancevo, that it continues with its “tinkering” in order to be competitive in the produced products placement – not only in the country but in the region where the NIS in the meantime acquired or opened an enviable number of gas stations. Critics forget that the Russian majority owner gave up to cut the oil refinery in Novi Sad, which was destroyed in the NATO bombing in 1999, into scrap metal and began the modernization project of oil refineries in Novi Sad, which will produce high-quality base oils, of which a significant amount will be exported.

Thus, in contrast to the INA’s refineries, whose fate is still uncertain, NIS makes stronger its economic company base precisely in the refineries. This, of course, would not be possible without its own crude oil production. Critics of the fact that the NIS was sold to the Russians and not, for example, to Hungary’s MOL, Austria’s OMV, or to some other oil multinational company,  such as Shell.

They have been late with this criticism, however, because their actions would have sense at a time when Mladjan Dinkic, perpetual minister in all the governments of Serbia since 2000. until today was holding documents for the tender for the NIS privatization in the drawer.

In the meantime, Serbian politicians, leaders of the Democratic Party and the Serbia Democratic Party, Boris Tadic and Vojislav Kostunica negotiated with the Russians of the interstate oil and gas deal, which is then transformed into a treaty, which got the validity of the Serbian Parliament. NIS was sold in 2008.

By 2009, when the Russian strategic partner Gazprom Neft came in NIS, it was believed that oil resources in the territory of Serbia were exhausted and that domestic oil production had no perspective. Although nobody expected the increase in reserves, NIS investment in the resuscitation of domestic oil deposits – with the use of new technologies and the development of complex reservoirs, lead to the production increase at existing sites and the resource base increase. It is undeniable that domestic crude oil production reduces crude oil imports, respectively, the NIS exchange outlay, and therefore of Serbia. And with an increase in crude oil and gas production in Serbia NIS provides the energy independence to the country, and with expansion in the region it provides a resource base essential for a successful business, as it is evident the increasing competition of other oil companies .

It should not be forgotten that NIS spreads the oil business in the region, not only through research and future crude oil and natural gas exploitation in the region, but also through the purchase of existing and new gas stations opening in nearby countries, including some EU members.

It is hard that this investment spread would be so great that the majority NIS owner, therefore, the Russian Gazprom Neft does not feel supported as an investor in Serbia. A payment policy of tax and mineral taxes certainly falls within the scope of duties that essentially affect the financial security of each investor. The mining rent payment is regulated, by the way, with interstate oil – gas agreement between Russia and Serbia from 2008, and the Government of Serbia adopted a decision, unanimously, on 23. May this year, that the mining rent for NIS remains 3 % until 2023.

This is certainly supported by the makers of the future NIS ambitions, not only at home but also in the region.

It should be stressed that Serbia is not exception in the reasonable policy regarding the mining rent collection to an oil company. Our nearby countries, Romania and Hungary, for example, have “frozen ” mining rent in ten or 15 years to the oil companies, in order to motivate them to invest in their business development . Because of the company success, that develops the business and operates with profits which benefit to all, especially to the state.

NIS, otherwise, in the name of mining rent, paid 41 MEUR last year and during the first nine months of this year in the state treasury. And also in the same period, it paid 1.5 billion EUR in the state budget, through a variety of taxes.

If these data on how successful NIS contributes to Serbian budget and its economy, it should be noted that from Shell, when some here were loudly talking about how they wanted to buy NIS, arrived statement that they had never want to do that . Austrian OMV now sells off its oil business. Precisely NIS bought their gas stations.

We are witnesses these days of what is going on with the INA and MOL. Croatian press reports that MOL’s strategy is to strengthen its refinery in Budapest, while the INA would be reduced in the retail network.

But we need not to go to the neighborhood. NIS can be also compared to the Serbian companies. So, for example, RTB Bor, who does not pay mining rent, while also spends Serbian natural resources, and at the same time owes for electricity to the EPS and other suppliers and subsists with the help from the state budget.

Source; Serbia Energy SEE desk