NIS to Invest $630 Million Annually Through 2015: CEO
Naftna Industrija Srbije AD (NIIS), the Serbian oil and gas company controlled by Russia’s OAO Gazprom Neft (GAZP), will invest 500 million euros ($630 million) annually over the next three years, its chief executive officer said.
Upgrading the retail network of some 250 gas stations in Serbia and expanding to neighboring Bulgaria, Bosnia-Herzegovina and Romania will take up 40 percent of the planned annual investment, while the rest will be split evenly between exploration and production and refining through 2015, Kirill Kravchenko told reporters in Belgrade today.
“We will soon complete reconstruction of our main refinery in Pancevo and we want to make sure that our retail supports placement of products from the refinery” that will be making less-polluting Euro-5-quality fuel, Kravchenko said.
The target for Bulgaria and Romania is to have about 40 gas stations in each country by the end of the year, then increase to 80 in Bulgaria and 120 in Romania by the end of 2014, he said. Euro-5 gasoline has a maximum sulfur content of 10 parts per million, while Euro-4 has a limit of 50 parts per million. A lower sulfur content means less pollution.
As of 2016, NIS investments will double and refocus on securing new sources of oil and gas, he said.
“Our plan is to bring annual production of oil and gas to 5 million tons of oil equivalent by 2020,” from 1.7 million tons of oil equivalent at present, Kravchenko said. “To achieve that, about 95 percent of all investment will have to be in exploration and production.”
Vertically integrated NIS, which has oil and gas fields in Serbia’s northern Vojvodina province and in Angola, signed an agreement last year with Austria’s Rohoel Aufsuchungs AG for joint exploration in Hungary. In Bosnia, it’s searching for hydrocarbons with Neftegazinkor, while in Romania it formed partnership with Canada’s East West Petroleum Corp. (EW)
Some of the plans may be revised in case of protracted delay in payments by Srbijagas, Serbia’s state-owned gas company, which owes 120 million euros for gas delivered, Kravchenko said.
“It’s a big problem with Srbijagas,” the CEO said. “Several days ago we signed an agreement on repaying the debt by the end of the year, but we don’t know if it will be possible with the current political and economic situation.”
Serbian parties have been trying to form a new government for almost two months, following inconclusive May 6 elections. The economy contracted 1.3 percent in the first quarter, while budget and current account gaps increased beyond agreed limits.
“We’re not getting any money for the gas sold to Srbijagas,” Kravchenko said. “That could have impact on our investment activity and on our financial indicators.”
NIS’s net income fell 15 percent in the first quarter, largely because of the weaker dinar, while operating cash flow deteriorated 95 percent due to the delays by Srbijagas and Elektroprivreda Srbije, Serbia’s state-run power monopoly.
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