Given that NIS was one of Serbia's most profitable companies in Yugoslavia 10 years ago, would you give us a brief overview of the transformations the company has been through in the last ten years?
NIS is still the most profitable company in Yugoslavia. It certainly survived some changes over the last ten years, most of them for worse, but that is why we are here now: to make things change and improve the image of the company.
What is NIS's present financial situation?
This is a country in transition. Therefore everything is changing and we need first to bring some kind of order to this market. A government decree granting us a monopoly has helped us to do that. In Pancevo our yield has increased three times up to 2,100,000 barrels. The amount of revenues has increased as well. During the year up to September has increased because of agriculture and high diesel prices. We made in this period about 66 million DEMs. In September alone we made 40% more than in the entire last year. We also needed to rebuild many refineries destroyed during the bombing. We have done that and can process about 10,000 tonnes of oil a day. In Pancevo they developed programmes for improvements at a cost of DM 250 million so that by 2005 they can compete.
Regarding the downstream and upstream sectors, are there any new businesses or explorations in Serbia?
Yes, certainly. However, our resources are depleting and Serbia is not built on a huge sea of oil. Any further exploration must take place outside Serbia. For example, in Angola we generate 174,000 tonnes per oil a year. We recently signed an agreement with Denka for an oil supply for next year, which is one of the first of its kind in recent history. The Raiffeisen Bank had given us $45m as a credit line, our first in over ten years.
Is there a lack of capital?
There's a huge lack, of course, because the former government depressed prices and held the market down artificially so NIS was forced into heavy losses. We owe $200m dollars for the gas sector and owe the Chinese $243m. Both of those result from the last ten years and make a total of over half a billion dollars. How does a small country recover from something so negative? It used to be a very profitable company. There are oil reserves in Vojvodina, but both our oil and gas reserves are in decline.
The Caspian lake pipeline going through Serbia might turn things around. How are you positioning yourself to ensure that Pancevo and Novi Sad take advantage of it?
They already do thanks to Serbia's geographical position. The terrain is flat and soft. It won't necessarily revive things, we can charge a fee, but it won't significantly influence business results. It will however give us easy access to the Caspian markets and it will be a little cheaper for us. We import 2.5m tonnes a year at a cost of half a billion, and transit fee won't exceed costs. It's a nice buffer of money.
I understand NIS has a venture with Energo Gas to develop as an energy force. Could you elaborate on that?
My view is that NIS should concentrate on the domestic market. The foreign market is huge and there is massive competition, so we have the advantage here in Serbia. Abroad they are all well established and a long way ahead of us. I would though be very happy if NIS could keep the Yugoslav market, rebuild refineries and so on. Other aspect could be to have some joint venture with Bosnia and have some sort of strategy in that area. Other than that I would not concentrate on export.
The main issue now is rebuilding NIS. What are you doing to put NIS on a stronger economic base?
We have ten divisions and two oil refineries that are independent units. As soon as Beopetrol is privatised, Jugopetrol and NAP are going to face real competition. We need to privatise our retailers so they can compete effectively. The businesses are burdened with huge numbers of employees that means they cannot compete. That way we will have privately owned refineries and gas stations. I want production and refinery on one side along with the petrochemical contracts. So we will end up with a petrochemical plant, two refineries as a core business and then we will import oil (a quarter of a billion dollars), refine it, price it and sell it to all other retailers in the country. So it's going to be very clean and very fair and we will all compete at the same level. We are becoming a more effective business and prices are decreasing.
| Would you say that you are decentralising or will independent companies still stay more or less under your umbrella?
If you want a technological entity then you build plants and refineries together. But the core is gas, two refineries and production. And that's it. Everything else is marketing.
Are you planning any ventures with foreign companies to complement those you have had with Russian firms?
This is a small market for a large American company for instance. We are a tiny market for huge companies. European company O&B from Austria have some petrol dealings with Slovenia and Shewrock has a small role in lubricants. That is all. On the production side we are not strong. On the retail side we offer 500 private and a total of about 1200 gas stations servicing 12 million people.
So you're looking at a project by project basis working with foreign companies?
Oilway is interesting. They came here wanting to build a number of gas stations, which is very easy. Selling the market like that is easy, but you kill yourself very fast as nobody is investing money.
Bringing foreign capital is going to be an important part of the expansion and modernisation process?
It is. However, it is not the only way out. It is important to have partners because state owned enterprises are in general less efficient. So I would like someone who is going to bring new management and different thinking. The relationship between state and private company is well defined. If I had it my way I would privatise a certain percentage of the core business as well and even a foreign company could be a majority owner. The key is having a good refinery that makes you profitable and competitive. If you can offer gas cheaper than even Chevron you will be successful. But first we have to get to that stage and then we can open up for competition. If we opened the market now we would get killed.
You were at ICN, then Deputy Minister and now Managing Director of NIS. How have these two previous experiences helped you?
Actually I left ICN in '94. Before that I spent eight months in the first government of this Yugoslavia. So I have governmental experience. In 1980 I worked for the Norwegian Government as commercial advisor for the five Balkan countries, advising Norwegian companies. I spent about fifteen years in California with a company that manufactured some nuclear devices, worked in coal mining and so on, which proved to be very valuable. Working in ICN I learned about business, accounting, law, financing and even nuclear science. ICN is a huge company with about 16,000 employees. It was exhausting but very interesting. You travel all over the world and meet nearly every single state man. So now everything fits together for a position like this. I call this an Olympic Game's performance, as far as the electricity sector is concerned. Yesterday we produced 30% more than ever before, this is the first time in six years there haven't been restrictions or power-cuts. A year ago you bought gas in coke bottles on the streets, now you don't see that. So there have been huge changes with a huge difference. There have been huge successes, this improvement in a year is an Olympic Games performance.
Are you satisfied with this decision?
No regrets, except for the hard work! A year ago I was taking it easy, playing golf. Now I have no time for any of that. It's a challenge. When I came in February there was no gas, no electricity and no pumps. We had nothing. My conversation lasted two minutes. They had no idea what to do, they left everything and gave me a key to my room and that's how I started. And then we moved building because the old one was terrible. One has to understand that a year ago this was a disaster and today it doesn't look that bad.
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