Balkan expansion for NIS after privatization

NOVI SAD – Serbian oil monopoly NIS expects its delayed privatization to be launched this year and is counting on the right strategic partnership to double output and grow into a Balkan leader, its general manager said. The sell-off, originally slated for 2006, was postponed as Serbia went through months of political uncertainty. There is still no government after an inconclusive January election, but all parties taking part in coalition talks say NIS is a priority. General Manager Srdjan Bosnjakovic said he expected 2007 to be the year when the government finally bites the bullet on opening up the company and goes ahead with a tender. «In the past 20 years we have missed many restructuring waves and we have to do a lot to make up for it,» he told Reuters in a weekend interview in the company’s head office in the northern city of Novi Sad. «NIS is currently the only state oil company in the region that hasn’t gone through transition and changed owners.» There is no final word on the precise form of the privatization, with the main political parties disagreeing on key issues such as the size of the first stake to go on sale, and the timing of subsequent divestments. A proposal by advisers Merrill Lynch and Raiffeisen sees a phased sale, with 25 percent of the firm offered initially and more parcels offered later on fulfillment of certain investment conditions. The price tag for the 25 percent stake was to be $300 million, based on NIS’s $1.2 billion nominal total value. Whatever the details, Bosnjakovic said NIS had a lot to offer to any strategic partner. «We control logistics in Serbia, meaning storage and transport capacities, as well as the only two refineries in the country,» Bosnjakovic said. »We think that a good investment program in the next three years would come in just the right time to enable the Serbian state, NIS itself, and the strategic partner to meet the demands of the market and draw maximum benefits.» Regional expansion Firms that have so far expressed interest include Hungary’s MOL, Austria’s OMV, Poland’s PKN Orlen Greece’s Hellenic Petroleum, Russia’s Lukoil and Gazprom Neft and Romania’s Rompetrol. Bosnjakovic said that in its expansion plan, NIS saw its big chance to move into the broader Balkan market in an area where there would soon be a gap. «There is no investment into the refineries in the Balkans and we estimate that by 2012 the region would face a deficit in oil derivatives,» Bosnjakovic said. «According to our business plan, an investment of 400 million euros over the next three years would enable production to reach the level of 6.5 million tons of derivatives per year by 2010, with products meeting European Union standards for both product quality and environmental protection.» NIS’s two refineries currently produce 3.5 million tons of derivatives, he said. An increase in production would be enough to meet the demand in the Serbian market and leave some for export. NIS also plans to invest 27 million euros in revamping its existing network of 480 gas stations around the country, building new ones mostly along pan-European highways, and also in drilling and developing its own supply. «Our goal is to have half of the produced oil derivatives from our own sources outside of Serbia,» Bosnjakovic said, adding that apart from exploiting and drilling rights in Serbia, NIS also has concession rights on fields in Angola. «If we want to have 50 percent of products from our own reserves it means we would have to go from 650,000 tons to 1,780,000. It’s not going to be easy, but it can be done, either in cooperation with big oil companies or by exploiting territories they are not interested in.»

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