 ENERGY |
For some time, last autumn, it looked like the whole future of democratic Serbia clung on one question "whether there would be massive cuts off of energy during winter". For ten years, during the regime of former Yugoslav president Slobodan Milosevic, there were almost no investments in the state Power Utility Company of Serbia (EPS). The system, once well developed, year by year turned into ruin. After NATO bombings in 1999, the situation became even worse and in winter 2000, during a very mild weather, Serbian citizens spent 55 days in darkness.
The international community, willing to show its support to Serbian people, pledged at least 300 million euro for the energy sector, mainly for buying electricity and spare parts. "In the last ten months we have invested our entire budget in EPS. But the effort was a success, because this winter (2001-2002) we had only four days of minor power cuts. This was a major achievement as we had the coldest December in several decades," says Serbian Minister of Energy and Mining Mr. Goran Novakovic.
On a short-term basis it was a great relief, but on the long term, the energy sector will be one of the main headaches for Serbian government for the next two to three years. Along with giving prizes for good jobs done during winter, the international community now wants to see some deep structural changes within EPS, which will be followed by a strong price increase. For the last ten years, in order to prevent social discontent, electricity prices were very low, so that both industry and households almost completely turned to electricity as a main source of energy. Now, this trend has to be turned around and it won't be an easy task to do. At least 60 percent of Serbian population cannot afford to pay their high electricity bills. In addition, they have no money to turn to some other source of energy. The Government had planned to raise prices of electricity for another 50% this spring. They increased it previously from 150%, and they had to give up strong public discontent. The government approved solutions that would enable citizens with high bills to be paid in several installments.
In spite of everything, creditors are willing to offer loans and technical support for EPS recovery. In October 2001, apart from the already approved 80 million euros worth loan intended for energy, the European Agency for Reconstruction allocated an additional 27.3 million euros donation to EPS, 15 million of which was used for electricity imports. Through programs of assistance to Serbia, the European Agency for Reconstruction has directed considerable funds towards the energy sector, i.e. towards EPS, and thus towards coal extraction as well. At the same time, the US Ambassador William Montgomery and Mr. Novakovic signed a memorandum for the supply of one-million-dollar-worth of power effective equipment for five municipalities in Serbia. The memorandum was co-signed by US Agency for International Development (USAID) Director James Stevens and mayors of the five Serbian towns for which the equipment has been secured: Kragujevac, Krusevac, Novi Pazar, Subotica, and Zrenjanin.
In November 2001, the German government donated DEM 10.6 million to EPS under the Stability Pact for Southeast Europe program. The director of the German bank for reconstruction (KWF) office in Belgrade, Michael Engelhardt, recently stated that this financial institution was currently working on projects primarily in the spheres of energy and water supply in Serbia, the value of which exceeds 100 million euros. These loans and grants were followed by a World Bank loan of 70 million dollars for the support of structural adaptation of the public finance, energy system, labor market, and health insurance and old age pensions systems concluded in December 2001.
Furthermore, the Dutch Government approved in February 2002 another US 230.000 dollars through the UN Development Program (UNDP) for improving the work of the Serbian Ministry of Energy and Mining. The money will be used for hiring new experts, for the training of personnel as well as for the technical upgrade of the services within the Ministry. The governments of Germany, Switzerland, Holland and Fund for an Open Society are among the Fund donators.
Finally, speaking at the Second Summit on "Investing in Yugoslavia" this February, Mr. Novakovic announced that the construction of a new electric power plant is to begin this year. He also said that the construction of a gas reservoir is part of the plan. This project costs US 22 million dollars. Foreign investors, he assessed, will have the opportunity to participate in the implementation pipelines developing in Serbia and connect 550 thousand households to the pipeline by the end of 2010. Novakovic also stressed that a Serbian Agency for Energy Efficiency was to start working in May and that its goal would be to contribute to the reduction of electricity consumption. The European Union will provide 5 million euros for financing the entire project in the first two years. | In spite of this gloomy situation, several foreign investors are interested for joint ventures in this sector. The privatization of EPS will not start before the company is divided into three separate sectors: generation, transmission and distribution, but Mr. Novakovic confirmed that the Serbian government was already in talks with several foreign companies, such as the German giants RWE and E.ON, EdF from France, Endesa from Spain, etc., about possible investments in the utilities' sector.
The oil and gas sectors are in a much better shape. The Serbian Oil Industry (NIS) became operative in 1949 with the founding of a state company for oil and gas prospecting. The first oil and gas deposits were discovered in the fifties, the first refinery was constructed in the sixties, and in the nineties the oil industry was among the most profitable companies in the country. Since its establishment, the oil industry in Serbia has produced more than 35 million tons of crude and more than 26 cubic meters of natural gas. Ninety-one oil-gas fields with 260 deposits have been located. The Serbian Parliament passed a decision in 1991 for 42 companies for the production and trade of oil and oil products to merge into one state oil company. NIS, thus, now consists of: "Naftagas", "Gas", Energogas", the Pancevo Oil Refinery, the Novi Sad Oil Refinery, the Belgrade Refinery, FAM Krusevac, "Jugopetrol" and "Naftagas promet".
Oil and gas prospecting and production are carried out by Naftagas, which represents an upstream component of NIS. Naftagas is a highly integrated entity whose prospecting-production capacities exceed the potential of their rational exploitation in the country. In addition to oil and gas prospecting and production in the country, NIS also has concessions on oil fields in Angola and operations in Algeria and Turkmenistan. The high degree of prospecting in the country and the fact that oil gained by investing abroad is 25%-30% cheaper than traditional import has induced Naftagas to turn to oil production abroad. Naftagas operates 35 oil and 25 gas fields in Vojvodina and the daily production reaches approximately 3,000 tons of oil and 2.5 million m3 of natural gas. Around 240 thousand tons of oil per year comes from oil fields Angola. Most of the domestic deposits have been exploited for a long time and are showing signs of depletion; therefore, domestic oil and gas production is decreasing.
The Serbian Government recently announced that some parts of NIS and some other gas stations chains such as NAP (the biggest chain of gas stations in Vojvodina region) and Beopetrol (second biggest chain of gas stations in Serbia, independent from NIS) were already prepared for privatization. Beopetrol possesses 187 gasoline stations and seven storages, worth 220 million DEM. The Government believes that Beopetrol privatization would be finalized in June 2002. A good number of top world or regional players such as the Austrian OMV, Hungarian MOL, Russian Lukoil, Hellenic Petroleum, British Shell, and Slovenian oil company Petrol already confirmed their interest in purchasing 70 percent of the company.
There are four refineries within the NIS oil processing. Two of them are of the energy type (the Pancevo Refinery and the Novi Sad Refinery), while the other two produce oils and lubricants (Belgrade Refinery and FAM Krusevac). The Serbian minister for privatization Aleksandar Vlahovic announced that the privatization of NIS would start with public tenders for the most profitable parts of NIS, such us the oil refinery in Belgrade and the Lubricant factory in Krusevac (FAM). The Russian Lukoil already expressed its interest in purchasing both factories. The other parts of NIS will be gradually privatized, but not before the 2004.
"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" says Mr.Dimitrije Vukcevic, Deputy Minister of Energy and acting General Manager of State Oil Company (NIS) who believes that at the end NIS would focus on a petrochemical plant, and two refineries as a core business, while the rest of the oil sector will be in hands of foreign investors. |
