Djedovic: ADNOK Waits for MOL to Buy NIS's 56 Percent
Serbia's mining and energy minister says talks between Gazprom Neft and MOL over the 56 percent stake in NIS are progressing, still need OFAC approval, and that Serbia is not the obstacle.
The 56 percent stake in Serbia’s Petroleum Industry (NIS), which Gazprom Neft is selling to Hungary’s MOL, is waiting on two signatures: an agreement between the two companies and approval from the Office of Foreign Assets Control (OFAC), the U.S. Treasury Department’s sanctions arm. Serbia’s Minister of Mining and Energy Dubravka Djedovic Handanovic told Politika that the talks are progressing and that Serbia is not standing in the way, though she added that the final outcome does not rest with Belgrade.
“We hope for a swift finalization of the agreement between the Russian and Hungarian sides, which also needs to receive OFAC’s approval.”
The minister added that such a deal would give the company a lasting, stable solution after months of operating in deep uncertainty, month to month, and that the state is ready with alternative options should the outcome prove less favorable, in order to protect its own interests. President Aleksandar Vucic has announced talks with Russia’s president and Hungary’s prime minister on the same issue.
Why Did ADNOK Step Back?
The minister’s answer, given here for the first time, explains the sequence Abu Dhabi wanted. ADNOK, the United Arab Emirates’ national oil company, was interested in entering NIS’s ownership as a minority shareholder, but only after MOL bought the 56 percent stake from Gazprom Neft. In other words, the Emirati company never walked away from the asset itself, it was waiting for the Russian ownership stake to be resolved first, and that has not happened yet.
The state’s position on this has not changed.
“Our position as a state is that ADNOK’s entry would be good for NIS”
What’s Already Signed
The Shareholders’ Agreement signed in June between Serbia’s government and MOL already binds both sides, regardless of when the Russian stake changes hands. Under the agreement, Serbia will buy an additional five percent of NIS shares, and the Pancevo refinery will operate for the next ten years at no less than the capacity level it had before U.S. sanctions were imposed.
How much that document means to the other side shows up in MOL’s own numbers. In its second quarter report, released in mid August, MOL listed the Shareholders’ Agreement with Serbia’s government among the period’s key corporate events, the same category companies use for acquisitions and major investment decisions.
A Nine Percent Royalty and Petrohemija’s Fate
According to a source close to the talks, the two sides had to compromise on two points.
- Serbia’s oil extraction royalty currently stands at seven percent of company revenue. The Serbian side pushed to raise it to 13 percent once MOL takes over the majority stake, arguing that MOL pays 18 percent for the same activity in Hungary. The two sides settled on nine percent.
- The second sticking point was Petrohemija, a NIS subsidiary. Serbia insisted it be included in the arrangement too, calling it one of its red lines. MOL rejected the request, in part because of its own petrochemical investments, having opened the Poliol complex in Tiszaujvaros two years ago, the largest investment in the company’s history.
The gap between seven and nine percent royalty looks small until it is converted into money on an annual basis, and that percentage alone determines how much of Serbia’s domestic oil output stays with the state budget and how much goes to the new owner.
The next move is not Belgrade’s to make. Until OFAC approves the ownership transfer, NIS remains in month to month operating mode, running on licenses that get extended one at a time rather than planned a year ahead.
