Serbia: GazpromNeft NIS CEO forecasts USD 46.5 per barrel, NIS also expands into power trading in SEE

11. January 2016. / News Serbia Energy

In mid-2014, 99% of experts forecast that the oil price will be above USD 100 per barrel.  And then a drastic collapse ensued. Nobody could believe that this would be a long-term trend; they thought it was an error or just a momentary state of affairs. Now, analysts’ forecasts range from USD 40 to 70 per barrel over the next three years. GazpromNeft NIS forecast is a conservative one, since the most important thing for us is that our projects remain stable. That is NIS is officially forecasting crude oil price of USD 46.5 per barrel over the next three years. Unfortunately, the situation may get worse; as you can see, the price of crude oil is now USD 35, which presents yet another big challenge for GazpromNeft NIS company explains CEO Kirill Kravchenko.

Despite pessimistic oil price forecasts, NIS is planning to invest up to EUR 1 billion over the next three years. The amount will primarily go to increasing hydrocarbon reserves and bottom-of-the-barrel, also investing in the expansion of the power engineering business and retail network.

GazpromNeft NIS CEO expect a decline in financial results and net profit in the amount of over RSD 10 bn. NIS managed to maintain profitability notwithstanding the drastic drop in oil prices and foreign exchange rates where we lost around RSD 10 bn. At the same time, the results will be better compared to the planned production indicators. Specifically in the segment of oil and gas production, refining, and also in retail and premium channels. NIS has managed to achieve good results owing to the supplementary operational efficiency program which has been implemented in the Company at all levels. In 2015, EBITDA will amount to around RSD 40 bn, while the cash flow from the business activities will approach the last year’s amount, at the level of around RSD 40 bn. Based on this and the retail indicator, NIS has achieved better results than the competitors, for example MOL, OMV and INA.  It is important to note that in 2015 we implemented the investment programme in the amount of around RSD 30 bn.

Kravcenko explains that GazpromNeft NIS have increased the level of premium products in refining – we have invested in different parts of refining. We have introduced new technologies for unconventional reserves in the production, applying them also to deep drilling. A new environmentally-friendly approach in fracturing gives us additional capacities for production and increase of oil and gas reserves. In sales and distribution, we continued introducing new products and services, such as G-drive branded fuel. Furthermore, we have reduced benefits for the managers and the number of foreign employees by hiring local professionals.  We have changed the motivation method, increasing the level of variable pay against the fixed portion based on the results. We have also reduced the costs in all segments of cooperation with partners, namely by negotiating with those who are involved in investment projects, goods and service delivery, obtaining discounts and increasing the efficiency of warehousing and logistics. We value the measures proposed not only by the top of the management, but also by the common workers on the ground, and for the latter ones we are especially grateful. Last year, we received from our employees more than 800 proposals for increasing internal efficiency of all business processes. We selected and started implementing the best ones among them. In 2015, we expect almost EUR 80 mln to result from the measures for internal efficiency increase, and in the next three years minimum EUR 100 mln.

In mid-2014, 99% of experts forecast that the oil price will be above USD 100 per barrel.  And then a drastic collapse ensued. Nobody could believe that this would be a long-term trend; they thought it was an error or just a momentary state of affairs. Now, analysts’ forecasts range from USD 40 to 70 per barrel over the next three years. Our forecast is a conservative one, since the most important thing for us is that our projects remain stable. That is why we are officially forecasting crude oil price of USD 46.5 per barrel over the next three years. Unfortunately, the situation may get worse; as you can see, the price of crude oil is now USD 35, which presents yet another big challenge for us.

GazpromNeft NIS also became a power producer with ambitious plans for all SEE region. Their forecast shows that with the construction of new capacities in this area NIS could get between 7 and 25% share in the local market. Depending on the size of the projects, NIS will implement them together with the partners. Apart from that, NIS is already selling electricity to the neighbouring countries. NIS have obtained the licence for Romania, Hungary and Bosnia and Herzegovina. NIS know that a number of power generating capacities will be put out of service in the following years due to their long service life and we thus want to contribute to the energy security of our country. To that end, we have several courses of action, from the increase of power generating capacity to the trade with the neighbouring countries. However, Serbia is the most important for us, since this is the country where we live, work and pay taxes. According to Kravcenko that is why Serbia will remain the priority in terms of energy generation, transmits Serbia-energy.eu

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