Hellenic Petroleum considers its departure from Montenegro

Hellenic Petroleum (HELPE) has found itself at loggerheads with the government of Montenegro, following the Greek company’s acquisition of state oil firm Jugopetrol AD Kotor in 2002 and culminating recently in the search for oil. Along with the Montenegrin company, HELPE bought storage space and the rights to search for and produce petroleum in three undersea locations in a consortium with British company Ramco. The British went bankrupt, so HELPE obtained the full control of rights in February 2005. Since then HELPE has been negotiating with the Montenegro government about a partial change in the law on research and use of oil, as well as the extension of concession licenses. While the government in Podgorica sought help (offered by HELPE itself) in order to adjust its legal framework to the European reality, it refuses to proceed toward modernization. On the one hand, it negotiates and, on the other, threatens with re-nationalizing the reserves. Montenegro’s attitude during its latest contacts with the Greek group has angered the management of HELPE, which, according to sources, is even considering its departure. To HELPE’s request to settle the pending institutional issues, Podgorica committed itself to answering within 10 days, without ever actually responding. HELPE’s thoughts of departure have to do with the general attitude of the Montenegrin government toward the Greek investment, which seems to be an intriguing story. The very buyout of Jugopetrol AD Kotor in 2002 for about 90 million euros, which is more than twice the amount proposed by the second bidder, Lukoil, immediately raised many eyebrows. The price paid by HELPE (some 50 percent higher) upon winning the tender was branded as «premium» by the then administration of Athanassios Karahalios and Giorgos Moraitis, since it would serve the expansion of the company in the broader region and specifically in the port of Bar. Then it emerged that some 30 percent of storage space, which had cost HELPE a serious amount of money, actually belonged to a corporation of strategic reserves managed by the Serbia-Montenegro federation. The Montenegro government had founded a state oil products company (Montenegro Bonus) to which it conceded those storage spaces. This company, founded just after the sale of Jugopetrol, is today competing with HELPE – an internationally unprecedented policy. HELPE has appealed to the courts, to no avail, so now there is a serious business and ownership problem. The outcome of the investment will apparently be determined by the attitude of the Montenegro government on the issue of bores. Podgorica’s delay in proceeding with the new institutional framework creates a major problem for HELPE, as the latter has to coordinate its search activities in Libya, Egypt and elsewhere in the midst high demand for oil drilling in the Mediterranean. This is due to the intense drilling activity following the rise in oil prices. Since the buyout by HELPE, the Montenegrin press has repeatedly referred to several strange occurrences, including the disappearance of about 10,000 vouchers used by police officials for free fuel from Jugopetrol just one month after the sale. Jugopetrol’s financial results in 2003 were negative and significantly below the original estimates during its valuation. The company controls 33 gasoline stations of a total of 60, retaining a 55 percent market share.