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Gazprom Neft Fulfills Investment Obligations under Sales Contract for 51% of NIS Shares

In April, Gazprom Neft completed the last investment tranche required by a sales contract for 51% of the shares of NIS (Naftna Industrija Srbije Open a new window). The company thus fulfilled the terms of the agreement with the Government of the Republic of Serbia two months earlier than the date specified in the contract. Since 2009, Gazprom Neft’s total investment in a program to modernize and reconstruct the NIS refinery and improve the environmental safety of the Serbian company’s production processes has reached the level of 500 million euros, fixed in the sale contract.

Modernization of production processes is a fundamental to NIS achieving the strategically-important top position in the Balkan market for oil products. An essential element of the program is the modernization and construction of a facility for light hydrocracking and hydrotreatment at the Panchevo oil refinery.

The new facility will improve the quality of the output. In particular, the refining depth will increase up to 84%, and the yield of light products with improved quality — up to 76%. Furthermore, the environmental safety will be improved. The volume of polluting emissions discharged into the atmosphere, including particulates, will be cut to the level required by the standards of the European Union.

As a result of the modernization project, the processing capacity of the refinery will reach a maximum of 4.8 million tons per year, making it possible to fully satisfy the needs of Serbia’s internal market and export oil products to the Baltic states.

Bringing the hydrocracking and hydrorefining facility into operation will provide NIS with a complete transition to the production of gasoline and Euro-diesel with sulfur content of up to 10 ppm, which complies with EU environmental standards. Once the facility is in operation, the rated gasoline production capacity at the Panchevo refinery will be roughly 640,000 tons per year. Moreover, Euro-diesel output will increase by 6.5 times, up to 1.5 million tons per year.

In addition to the hydrocracking and hydrotreatment facility (MHC/DHT), the modernization program for the NIS refinery complex includes the construction of a hydrogen unit, sulfuric-acid recovery unit, and a tank farm for liquid gas in an industrial zone in Panchevo, as well as the renovation and construction of the plant’s infrastructure, reconstruction of the fluid catalytic cracking (FCC) system, and a freight dock.

Construction of the hydrocracking and hydroretreatment facility at the Panchevo refinery will be completed in the third quarter. The facility is slated to be brought into operation in November 2012.

Vadim Yakovlev, chairman of the NIS Board of Directors and first deputy CEO of Gazprom Neft, said: “Gazprom Neft has fulfilled its investment obligations ahead of the schedule specified in the sales contract. This again confirms that the Government of the Republic of Serbia acquired a reliable partner in 2009 to develop the country’s oil industry. Today the modernization of the NIS refinery entered its final stage: construction is being completed on the last sites and testing of the system’s infrastructure and equipment has begun. But wrapping up the investment cycle does not signal the end of modernization of the Panchevo oil refinery: NIS is drawing up a strategy for the future development of the plant and its production capacity.”

Notes for editors

NIS Open a new window is one of the largest vertically-integrated oil-and-gas companies of southeast Europe. It is engaged in the exploration, production, and refining of oil and gas, as well as the sale of oil products. The primary shareholders are Gazprom Neft (56.5%) and the Government of the Republic of Serbia. The company owns two oil refineries with a combined processing capacity of 7.3 million tons of oil annually in Panchevo and Novi Sad. The company also owns 480 gas stations and oil depots. NIS operates in several European countries, conducting exploratory and drilling operations in Serbia, Hungary, Romania, Bosnia and Herzegovina, and Angola.