Twist in NIS story! Serbia and MOL reach agreement, but one decision of Russia and OFAC changes everything

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The agreement between Serbia and the Hungarian oil company MOL on a possible transaction related to Petroleum Industry of Serbia, NIS, represents an important step towards solving the issue of the future ownership of the company and the continuation of its smooth operation, says Strahinja Obrenovic from the Faculty of Political Sciences.

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According to information available so far, Serbia has reached an agreement with MOL, the Pancevo refinery will continue to operate at least to the same extent as before, and the state could acquire greater management rights in NIS via an additional 5 percent of shares, reports RTS.

However, the entire arrangement depends on two key conditions: that Russia's Gazprom Neft agrees to sell its stake to MOL, and that the US Office of Foreign Assets Control (OFAC) approves the transaction.

Key question: Will Gazprom Neft agree?

Obrenovic says that for the first time more specific details about the negotiations between Serbia and MOL have been presented to the public, but that the most important question is still open.

"It remains to be seen how the negotiations between Gazprom Neft and MOL are going, because this is the most contentious point at the moment," said Obrenovic.

He reminded that MOL was mentioned as a potential buyer at the beginning of the year, as part of a solution that allowed NIS to continue to work and import crude oil.

Pancevo refinery is of strategic importance

Speaking about the importance of the Pancevo refinery, Obrenovic emphasized that its continued operation is crucial for a stable supply of fuel to the domestic market.

"There were various options in the negotiations, including the possibility of reducing the refinery's capacity. That is why it's important that it has now been confirmed that the refinery will continue to operate at least as before," he stated.

He stressed that the refinery is modernized and capable of processing different types of crude oil.

From 2022, Serbia will no longer import Russian oil through JANAF, so the supply relies on other sources, primarily Kazakhstan, and before that, Iraq was a significant supplier.

Obrenovic warned that uncertainties on the global energy market further emphasize the importance of preserving the stable operation of NIS.

"The crisis in the Middle East doesnt't yet have an outcome. That's why it's important that Serbia can process different types of oil and provide alternative supply routes," he said.

What does additional 5 percent of shares bring to Serbia?

Commenting on the possibility of the state increasing its ownership share in NIS by 5 percent, Obrenovic believes that the significance of that move depends on the final contract.

"A bigger ownership share also means greater influence on decision-making, but 5 percent in itself does not automatically mean decisive control over the company," he explained.

He added that there are models such as the so-called "golden share", which allow states to block decisions that are not in the public interest.

Most realistic scenario: New license extension

According to his assessment, it is unlikely that the entire operation will be completed before the current license issued by the US expires.

"It's more likely that the business will continue through new license extensions, because it's difficult to expect that a final acquisition agreement will be reached in a short period of time," said Obrenovic.

He believes that the Russian side currently has no particular interest in speeding up the sale, especially considering that some Russian energy companies have already received exceptions in other markets.

What will happen to Petrohemija?

When it comes to HIP Petrohemija, Obrenovic does not expect major changes if the continuity of the refinery's operation and supply of crude oil is ensured.

"I expect continued investments and fulfillment of assumed obligations, while Petrohemija, at least in the short term, will very likely remain under the existing ownership structure," concluded Obrenovic.

(Telegraf Biznis)