NIS Oil License Expires Tomorrow, Vucic Expects Deal

The operating license the US Office of Foreign Assets Control (OFAC) granted to Naftna Industrija Srbije (NIS) expires tomorrow, August 28. A day before that deadline, Serbian President Aleksandar Vucic said publicly for the first time that he is optimistic the entire deal over the Russian stake in the company could be closed by September.

He made the comment on August 27, away from the energy story itself, during a visit to the Innovation and Education Park of Serbia’s Mine Action Center in Velika Mostanica, where he attended a demonstration of demining work.

For the first time, it seems to me, and I am optimistic, and I hope that in September we could close the whole story around Naftna Industrija Srbije.

Vucic said this, adding that without understanding from the American side, the supply situation could have slipped out of control.

Without a degree of understanding from both OFAC and the American side, it’s hard to see how we could have kept this under control without major consequences up to this point, or be getting close to an end.

The president also thanked the US government for a $5.1 million donation toward demining, which brings total American assistance to Serbia for that purpose to $34 million.

New request ahead of the deadline

Before its current license expired, NIS filed a new request with the US Treasury Department for a special license that would let the company keep operating without interruption. Negotiations over the ownership structure itself, meaning the sale of the Russian majority stake, are still being held between Gazprom Neft and Hungary’s MOL.

The August 28 deadline does not apply only to NIS. Croatia’s pipeline operator JANAF received a license running to the same date, covering continued crude oil transport to Pancevo, which ties the refinery’s supply question to that permit as well.

Prime Minister Djuro Macut said late last week on Radio Belgrade 1 that negotiations over the takeover of the Russian ownership in NIS are going well and that he sees no reason Serbia’s request should not be granted, adding that the country’s oil and derivative reserves are close to their maximum.

Is the Pancevo refinery running at full capacity?

Mining and Energy Minister Dubravka Djedovic Handanovic met on August 5 with NIS general director Kirill Tyurdenev. Officials said at the time that the Pancevo refinery was processing 11,000 tons of crude oil a day, or roughly 330,000 tons for the whole of August, with plans to raise that to 13,000 tons a day.

Diesel demand for August was estimated at around 200,000 tons, while the company said it held kerosene reserves sufficient for about a month and a half of consumption. Shortfalls in imports, made harder by low water levels on the Danube, were being offset by higher refining output in Pancevo and NIS’s own operating reserves. Diesel imports of around 39,000 tons had been planned for August, while the refinery had previously been processing about 9,500 tons a day, with output expected to rise to around 13,000 tons from the second half of the month.

The actual scale of refining remains disputed. The 021 news portal noted a discrepancy in the assessments on August 8: Vucic had warned that low water levels on the Danube could force the refinery into a temporary shutdown, while both the minister and NIS itself maintained that the plant was running at increased volume. NIS was direct in its statement that day.

Production of petroleum products is currently proceeding normally. Water-saving measures have been taken without any direct impact on the operation of the processing units.

What’s next

We reported on this earlier, when Prime Minister Macut said he expected an OFAC response on the NIS license within days. That response had not arrived as of this morning, and the deadline is now one day away.

The next step is OFAC’s decision on the new request for a special license, which should arrive before the current authorization runs out. If Vucic’s announcement from Velika Mostanica holds up, the question of NIS’s ownership structure and the terms for running the Pancevo refinery should be settled by the end of September, along with the answer to how much oil the company actually processed in the meantime.