REFINING ON OUR WAY TO THE TOP

ON OUR WAY

TO THE TOP

Refining

2

Refining

3

EquipmEnt

modErnization,

innovativE approach,

and application of

mod Ern tEchnologiEs

in nis arE a prErEquisitE

for advancEmEnt,

compEtitivEnEss, and

gaining of rEgional

lEadErship

Refining

2

Refining

3 interview social responsibility Hse people

contents

Regional development –

a key pRioRity

SaFety FiRSt

employeeS aS a key to SucceSS

enviRonmental and local

community caRe

thRee lineS oF gRowth

16

The Colours of NIS in the Balkans

28

Why we need efficiency

36

NIS from the Land to the Skies

46

Regional development – a key priority

60

Environment and local communities care History

exploration and production

service

sales and distribution

buisiness

reFininG

mission

reGion cooperation

paRtneRShip FoR the FutuRe

on ouR way to the top

eneRgiZe - the mouth oF all

poSitive eneRgieS

niS in bRieF

the colouRS oF niS in the balkanS

decadeS towaRd a

leading poSition

moving couRageouSly

towaRdS new diScoveRieS

why we need eFFiciency

niS FRom the land to the SkieS

6-7 8-11 12-15 32-35 5 16-21 22-27 28-32 36-41 42-45 46-53 54-55 56-59 60-63 enerGy

Refining

4

Refining

5

Energize

The international magazine of NIS. Issue 1, December 2013

Published by: NIS, Novi Sad, Serbia

Public Relations and Communication Department Fpr@nis.eu Phone +381 11 260 66 95

iSSue

1

y: 2013

october november december reGional maGazine dear friends,

In recent years, NIS has been dynamically developing new markets and expanding its presence in other countries.

We are currently working in nine countries and NIS employs staff in 23 countries. Thus, NIS is a company with an international team of experts - both in the parent company, as well as in affiliated companies and subsidiaries abroad.

Our dynamic development has propelled the need for active communication, which is something that is always in motion, following along with the company‘s core business. That is why we are launching NIS’s international magazine also in the English language, where we will consolidate everything that we do and all the people involved therein into one place, irrespective of the country where they work or the language they speak. The basic idea of starting a new magazine is to improve the

communication among all employees, strengthen the sense of belonging to the parent company, and get to know the people who work in the same or similar fields. Also, entering the international

market will include communication with business partners outside of Serbia - who are also our target group - as well as investors, government agencies, and experts in the field of energy.

Therefore, the first issue of our new magazine is devoted primarily to familiarizing our readers with our core business lines - as a short overview of the history of our company‘s development strategy.

In the next issues, Energize will be a place where you can keep track of trends in the fields of energy, where you can stay up-to-date on analysis, market conditions, and new technologies, and where you can read up on discussions about developmental

directions. Most importantly, you can ceo of nisKirill Kravchenko

stay firmly and clearly oriented about the future of the company, which is something that NIS has always striven towards.

For us, Energize is a harmony of all our energies and we hope that while reading our new magazine, you will also feel at least some of that energy.

enerGize

-

THE MOuTH

OF All

pOSITIvE

ENErgIES

Our dynamic development has

propelled the need for active

communication, which is something that

is always in motion, following along with

the company’s core business.

ON OUR WAY TO THE TOP

REFINING

Art direction and design by Metaklinika

Illustrators:

Aleksa Jovanović,Bruno Tolić Photographers:

Mladen Janković, Dušan Đorđević

Print: “Stojkov”

Energize Magazine is published quarterly. Copyright © 2013 NIS

www.nis.eu This magazine is printed

on paper from responsibly managed forests The mark of responsible forestry

mission

6

mission

7

NIS is one of the biggest vertically in-tegrated energy companies in South-eastern Europe. The company performs oil and gas exploration, production, refining, sales and distribution of petro-leum products, and implementation of petrochemical and energy projects.

In Serbia, NIS owns a refinement com-pound with two production units – in Pančevo and in Novi Sad - with a total processing capacity of 7 million tonnes of oil per year, as well as lpg produc-tion unit in Elemir. NIS produces around 1.7 million tonnes of oil and gas a per year. The total volume of processed crude oil amounts to around 2.1 million tonnes a year. The Company’s retail network includes more than 500 facili-ties: petrol stations, filling stations and a network of crude oil storage facilities on the territory of the Balkan region.

our mission

By responsibly using natural

resources and advanced technologies, we provide people of

the Balkans with the energy to strive

for improvement

nis in

brieF

our vision

NIS will emerge as a leader in its

in-dustry across the entire Balkan region

through its sustainable growth and

increased efficiency, demonstrating high

social and environmental responsibility and high customer service standards.

expertise

Gaining up-to-date knowledge with the goal of constant professional development, and the ability to implement

it in actual business processes.

positivism and cooperation

Readiness to participate in multifunctional groups and projects, eagerness to meet the demands of colleagues from other

units of the company, willingness to exchange information, ability to

work in a team.

initiative and responsibility

Finding and suggesting new solutions both in the working environment, and in

the sphere of company interests.

collective results

Collective effort in achieving visible and meaningful results, a desire to succeed and provide

each other with needed assistance.

our values

Outside of Serbia, NIS is also present in Bosnia and Herzegovina, Hungary, Bulgaria, romania, Turkmenistan, Angola, Belgium and russia.

The Company’s registered office and its main production capacities are located in the republic of Serbia, which is the Balkan’s trading and investment center due to its geographic position. NIS is a the leading supplier of petroleum prod-ucts in Serbia.

gazprom Neft owns 56.15 % of the share capital in NIS, while 29.88 % of NIS shares are owned by the republic of Serbia. The remaining portion belongs to the citizens, employees, former employees and other minor sharehold-ers. The Company has around 2.5 million shareholders. NIS shares are listed in the Belgrade Stock Exchange.

history

8

history

9

1

952

The first oil field was discovered in the North of the country - near Jermenovci in the Banat district - close to a gas reservoir. Even though this is not a large field, it has been pivotal for the development of the entire oil industry in Serbia. resources were allocated for further exploration and development of the Company and the staff acquired valuable knowledge in oil and gas exploration and production at this first site.

1968

velebit oil reservoir, the country’s largest reservoir, was discovered. velebit oil is suitable for the production of naphthenic base oils due to its chemical composition. Base naphthenic oils are highly appreciated, because they are deficient in Europe and huge volumes are imported from the uSA and Asia. NIS would soon launch the production of naphthenic base oils from the abovementioned Serbian velebit oil.

1979

1953

An intensified construction of first petrol stations in Serbia’s major cities. Initially, the sale of petroleum products was measured in dozens of thousand tonnes to exceed the limit of a million tonnes a few decades later.

NIS IS A CoMPANy

wITh A RICh

hISToRy.

SINCE ThE FIRST

STEPS IN 1949

whEN ThE EARly

Beginnings of

ThE yuGoSlAv oIl

INDuSTRy wERE

oNly EMERGING,

IT hAS GRowN

INTo A SuCCESSFul

ENERGy CoMPANy.

RETRoSPECTIoN

ShowS MANy yEARS

MARkED wITh

GREAT ENThuSIASM,

hARD woRk, AND

unsurMounTABle

PRoGRESS.

1949

The Oil Exploration and production Company was founded. The aim of the newly founded company was to discover the “black gold” in the eastern part of the Pannonian Basin. The first natural gas reservoir was discovered in Serbia five months after the Company’s establishment. The government started to allocate funds for exploration and investments and also banks started to approve loans for the development of oil and gas fields.

Decades

toward a

Leading

Position

1

94

7

The Oil and petroleum product Trading Company was founded. Through the nationalisation and acquisition of existing small-scale petroleum storage facilities and the construction of new ones, a network of storage facilities was created. This prepared the grounds for a future distribution network which continued to develop alongside the road network and an increase in the number of vehicles.

1

96

1

“Belgrade Aeroservice” was established for the purpose of supplying air carriers with jet fuel. In the same year, an intensive cooperation with “JAT,” the Yugoslav air carrier, was established. The cooperation was later extended to international air carriers as well.

1982

A new record in the annual oil production of

was achieved.

1985

Oil exploitation commenced in Angola and this was the first time the Company entered in a concession agreement in a foreign country. Since then, NIS has produced over 4.2 million tonnes of oil at the concession reservoirs in Angola.

1968

Oil refineries were put into operation in the cities of Novi Sad and Pančevo. The first two decades were marked with the construction of primary refining plants. The secondary plants were built during the second period lasting from 1980 to 1992 for the purpose of deep crude oil processing. In terms of their technological capacity, the refineries were at the world’s top at that time.

1963

The construction of the first main gas pipeline connecting all oil fields with the City of Pančevo, where the first refinery was to be constructed, was completed.

A record annual gas production of

was achieved.

1,3 million tonnes

history

10

history

11

1991

The public enterprise “Naftna Industrija Srbije” was established. All the companies in the oil industry which had operated independently to that point were now united into a single company for the first time.

NIS – success from the ground up

“

The establishment of the Oil and Gas Exploration and Production Company,

the predecessor of today’s NIS, was in many ways significant for Serbia half a

century ago, especially since Serbia was at that time underdeveloped

and still almost completely destroyed from by the war.

This significance was primarily economic – the company was established

in a very prospective industry, which has been beneficial for the development of other

industries, such as the chemical and petrochemical industries, plastics industry.

This was a firm grounding for the later emergence of petrochemical

and chemical industries, plastics industry, industry of artificial fibres etc.

All this also involved technological development, which was

priceless for Serbia and ultimately for Yugoslavia as well.

The Serbian oil industry soon became one of the pillars of both economic and social

development. The fact that the companies from this area of business operations were at

the top among the largest companies, not only in Serbia but in Yugoslavia as well,

testifies to this. NIS has retained this position and role up to the present day.

Being a company with the largest profit and one of the largest investors,

NIS is among the key players in Serbia’s economy.

And not only in economy - the company has an increasingly

significant role in the cultural and artistic life of the country.

”

2011

By following its strategy towards becoming the regional leader, NIS started to expand its business rapidly in the regional market as well. Subsidiary companies were established in Bosnia and Herzegovina, Bulgaria, Hungary and romania, and the Company’s branch office in Brussels was opened to provide assistance in Serbia’s European integrations.

2012

The construction of the hydrocracking and hydrotreatment facility at the Pančevo Oil Refinery was completed, marking the completion of the first stage of modernisation of

NIS refining facilities.

Mijat Lakicević, economic analyst

2013

NIS has started the construc-tion of the first wind farm. With a capacity of 102 MW and consisting of 34 wind turbines, this will be the first project of its kind in Serbia. The capital investment in the project will amount to around

160.000.000 €

2012

A ceremonial opening of the first GAZPROM premium brand petrol station in Belgrade was held. This retail network started to expand rapidly in the region as well, namely in Bosnia and Herzegovina, Bulgaria and romania.

1999

Some production companies were destroyed, most of the damage having been caused to the refineries in Novi Sad and Pančevo during the NATO bombing campaign.

2010

NIS became a public company with the highest number of shareholders (nearly five million) listed on the Belgrade Stock Exchange. Consequently NIS became the largest “blue chip” company listed on the Belgrade Stock Exchange.

2011

The NIS Board of Directors adopted a long-term NIS Development Strategy for the Balkans by 2020 for the first time in the Company’s history. The Company’s main strategic goal by 2020 is to become the most efficient, fastest-growing energy company in the Balkans, maintaining its leadership position on the Serbian market and becoming one of the top three companies in the Southeaster Europe.

2005

The Company received the status of a joint stock company, appointing its own Shareholders’ Assembly, Board of Directors and other managing bodies.

2008

NISOTEC oil and lubricant brand entered the Serbian market. The lubricant business in NIS includes the development, production and sale of oil and technical liquids for consumers, commerce and industry.

51%

2009

The russian company “gazprom Neft” became the Company’s shareholder, pursuant to the interstate Sales Agreement between the republic of Serbia and the russian Federation on purchasing 51%

of the shares.

2012

By opening two new bunkering stations for ships on the Danube, NIS launched a new business activity – a secure supply of domestic and foreign ships and shipping companies with top quality fuel at important waterways in Serbia.

BUSINESS

12

BUSINESS

13

investments

In accordance with the Sales Agree-ment for the purchase of 51% of NIS shares, one of the key liabilities of “Gazprom Neft” was to finance the modernisation of the refineries. With the financial help of “Gazprom Neft”, NIS experts completed the construc-tion of the compound for mild hydro-cracking at the Pan vo Refinery. The

Majority Shareholder allocated more than EUR 500 million for the construc-tion of a MHC/DHT plant and its ac-companying facilities. The anticipated funds for the project were paid before its completion, and were higher than originally planned.

Experts of “Gazprom Neft” took active par-ticipation in the construction process from the MHC/DHT plant and offered consulting support to their peers from NIS.

paRtneRShip

FoR the FutuRe

Another stage in the development of NIS started in 2009.

The arrival of a new majority shareholder “Gazprom Neft”

marked the beginning of a reform process in NIS.

The reform was aimed at adjusting the company to

new work conditions of work and to increase business

efficiency.

It was hard to achieve this goal using merely NIS

resources. It was then that the foundations of a

partnership between the Serbian and the Russian

companies were set. In the years to come.

The partnership was established in many areas.

business

BUSINESS

14

BUSINESS

15

notHinG but

teamwork

Thanks to their rich and multidisci-plinary experience in the realisation of projects, Gazprom Neft experts were permanent interlocutors for NIS colleagues in the process of mak-ing strategic and tactical decisions regarding the further development of the Serbian company. This aspect of mutual cooperation takes one of the most important places in today’s communication between NIS and Gazprom Neft.

new

tecHnoloGies

Due to historical circumstances, NIS has been deprived of progressive technical and technological solu-tions that are necessary for efficient business activity for almost 20 years. However, after the year 2009, NIS received the possibility, not only to get acquainted with state-of-the-art technical and technological solutions in the energy field, but also to use them actively in its operation, leaning on support given by colleagues from Gazprom Neft. In order to clarify the

In accordance

with the Sales

Agreement for

the purchase of

51%

of NIS shares,

one of the key

liabilities of

“Gazprom Neft”

was to finance

the modernisation

the Pancevo

Refinery.

Due to historical circumstances, NIS has been

deprived of progressive technical and technological

solutions that are necessary for efficient business activity

for almost 20 years. However, after the year 2009,

NIS received the possibility, not only to get acquainted

with state-of-the-art technical and technological solutions

in the energy field, but also to use them actively in

its operation, leaning on support given by

colleagues from Gazprom Neft.

importance of this form of coopera-tion, it should be mentioned that it was with the help of consultations and technical support from Gazprom Neft that NIS’s Block “Exploration and Production” was able to stop its drop in production of hydrocarbon and since 2010, to generate the opposite, positive trend. In close cooperation with colleagues from Gazprom Neft, NIS experts have implemented new technologies in the area of oil refining.

developinG

an Hr policy

Another instrument of mutual coop-eration which enables both NIS and Gazprom Neft to cooperate on a mutu-ally beneficimutu-ally basis, is the rotation of personnel, during which employees from both companies have a possibility to exchange experiences with their col-leagues from other countries. For many of them, the experiences acquired during long business trips were really valuable. Each of the companies has its specifics and its strengths, and only a combination of the two creates a syn-ergy effect which is necessary for suc-cessful operations. Internship practice has also been widely applied, whereby employees from both companies have had a chance to get to know the work of their Russian, i.e. Serbian colleagues during a longer period of time. One of the main changes that hap-pened in close mutual cooperation with the Gazprom Neft head office, were innovations introduced in the corporate management of NIS and work with employees. Foremost, the approach of the personnel training process was changed at the Serbian company. If this approach was elitist and non-transparent earlier, now addi-tional knowledge has become abso-lutely available to NIS employees, and the assets allocated annually for this purpose are expressed in seven-figure amounts. An equally important initia-tive was the introduction of a modern motivation system that included the renumeration of individual perfor-mance for each employee, which has already shown positive effects.

a new work

pHilosopHy

One of the most seriously tackled nov-elties has also been the implementa-tion of a new organizaimplementa-tional structure in the company. Since 2009, a great task has been completed in consolidat-ing different company units, with the aim of improving their efficiency. One should also mention the elevated role of the NIS Board of Directors, which has become directly involved in the consideration and strategic

implemen-tation of company decisions. Changes in the organisational and managerial structure of NIS contributed to a spred more efficient control of the Company business, higher transparency level in business processes and an increase of NIS attractiveness for shareholders. To-day NIS applies high standards in the area of corporate management, which is based on internationally recognised principles and the best global practice.

regional cooperation

16

regional cooperation

17

the colouRS oF niS

in the balkanS

Since 2010, NIS has been

dynamically expanding its business

activities into the Balkan markets.

Subsidiaries were started in Bosnia and

Herzegovina, Bulgaria, Hungary, and

Romania. To support Serbia’s European

integration, a Company representative

office was opened in Brussels.

NIS has representative offices in Russia

and Croatia as well, and has also

been doing business in the territory

of Angola and Turkmenistan.

In 2010, NIS adopted a ten-year Devel-opment Strategy which laid solid foun-dations for the dynamic expansion of business in the region. According to the Strategy, oil and gas production should reach five million tonnes a year. However, given the fact that the possibilities of strategic growth of oil production in Serbia are insufficient for attaining the ambitious target of in-creasing production, and that the pro-duction on new reservoirs abroad can be more economically viable than oil production on old domestic reservoirs, a strategic plan has been drawn up of concession activities, aimed at

ensur-ing the growth of production and oil and gas reserves. This has incited NIS to develop regional business activities. One of the advantages of this move is that company experts are well-acquainted with the characteristics of this area, and NIS has logistical advan-tages as well, owing to the proximity of these locations. Subsidiaries were started in Bosnia and Herzegovina, Hungary and Romania, and at present we are already addressing the issue of analyzing geological and technical data from exploration wells.

Yet another strategic goal - increas-ing the volume of oil processincreas-ing - has motivated NIS to expand its business in the region. In 2009, NIS embarked on a thorough modernisation of its refin-ing capacities, and as a result, towards

the end of last year, one of the most important investment project in Serbia was finished: a modern hydrocracking and hydrotreatment complex, which ensures a continued supply of the highest-quality fuel to the state, pro-duced in accordance with the Euro-5 standard. The new refining capacity, at almost five million tonnes a year, al-lows the company to meet its strategic goal. However, this opens up a new question: Where are such great quanti-ties of petroleum products , produced in accordance with the most up-to-date world standards, to be marketed? The answer was found in the regional market. At present, apart from Serbia, NIS has been marketing its fuel in Bos-nia and Herzegovina, RomaBos-nia, and Bulgaria.

reGional cooperation

16

regional cooperation

18

regional cooperation

19

branko radujko,

NIS regional Manager for the Adriatic:

“Our business in Bosnia and Herzego-vina is developing according to plan. Apart from the exploration drilling which started at the end of May in the Northeastern parts of the country, the plan is for Jadran-Naftagas to drill another exploration well during the course of this year, in the eastern part of the Republic of Srpska – one of the entities of Bosnia and Herzegovina. The results of the drilling will deter-mine the dynamic of further oil and gas exploration in this area. Aside from exploration, we have also been working on improving our retail network, which at the present moment has 36 petrol stations spread throughout Bosnia and Herzegovina. Out of the 36 petrol stations, the 28 that we have acquired from OMV operate under the premium brand Gazprom, and the majority are

romania

NIS Petrol, the NIS representative office in Romania, is in the business of exploration and production, as well as the devel-opment of the retail network covering the entire country. As part of exploration and production, NIS Petrol collaborates with four companies: the Canadian East West Petroleum, the Irish Moesia Oil and Gas, the English Zeta Petroleum and the Romanian Armax Gaz. In the retail network, there are 13 Gazprom petrol station facilities in Romania. By the end of 2015, a network of 120 petrol stations in total will be operat-ing in Romanian territory.

vadim smirnov,

NIS regional Manager for romania:

“The key projects of our company in the Romanian market focus on hydrocar-bon exploration and production activi-ties in the Western part of the country. NIS has already started the exploration activities in Timis County, where an exploration well was drilled and testing the oil and gas flows are in progress. In the county of Bihor, on the territory of the concession block Tria NIS started the seismic prospection activities by contracting the Hungarian company Acoustic Geophysical Services (AGS to perform 2D and 3D seismic surveys in the field, in the area covering 545 square kilometers and 83 kilometers respectively. According to the plans, the drilling of the first exploration well on this block is to start at the beginning of next year, and by the end of 2014 at least three oil wells should be opened.

bosnia and

HerzeGovina

In Bosnia and Herzegovina, NIS is performing operations in the field of exploration and production through Jadran-Naftagas, a joint company with the Russian company Neftegazinkor with retail presented through two consumer brands - Gazprom and NIS Petrol. In 2012, the first petrol stations were opened in this country under the brand name NIS Petrol, while this year, NIS acquired petrol stations from the Austrian OMV in Bosnia and Herzegovina, and launched the premium consumer brand Gazprom.

located in the Federation of Bosnia and Herzegovina. The remaining eight facilities are located in the Republic of Srpska and operate under the brand name NIS Petrol.

We plan to develop company activities in the territory of Bosnia and Herzego-vina in the upcoming period as well. We will strive to ensure that every Gazprom petrol station is a place of recognizable quality: with the best fuels, choice consumer goods, and outstanding service. The network as a whole should be the leading premium brand in the market of Bosnia and Herzegovina. In addition, we will make an effort to optimize the network itself, as well as the supply process, so that NIS products are delivered to our sta-tions in the fastest and most conveni-ent way. Also, we have plans regarding development and significant position-ing in the wholesale domain. I am sure

that buyers will recognize the quality of our service in logistics and supply. We are particularly focusing on the corporate client segment. By the end of 2015, the Gazprom retail network will have 250 facilities in the Balkan region, out of which about 40 petrol stations will be in Bosnia and Herzegovina. In addition to the development targets in the area of sales and logistics, we are oriented in the long term towards activities related to exploration and, I hope, exploitation as well. The plan is to invest 40.7 million US dollars by the end of 2014 into oil and gas explora-tion, and a couple of hundred million dollars into the exploitation stage, on the condition that hydrocarbon reserves are confirmed. Aside from our activities in the Republic of Srpska, we are putting in efforts to get an oppor-tunity to carry out explorations in the area of the Federation of Bosnia and Herzegovina, as well.

The total value of investments in this stage of project implementation is about 21.2 million Euro.

The Gazprom petrol stations can be found on an increasing number of public roads in this country. At present, this network has 13 facilities. Inciden-tally, the plan is for the Gazprom petrol station network in Romania to have 120 facilities by the end of 2015. Our goal is to have at least a 10 percent share in the market by 2016, and at least one third in the premium segment to which the Gazprom network belongs. We plan to invest as much as 150 million Euros for that purpose. Apart from oil and gas exploration and retail development projects in this country, NIS has already attained stability in the domain of ship bunkering in Constanta. NIS is also evaluating the possibilities of supplying aircrafts with aviation fuel in the Tim-isoara area, as well as in the delivery of

bitumen for the building of roads whose quality meets the current European standards. In addition, our Oilfield Ser-vices Block has obtained certificates for two workover plants and well services for operations in Romania. We plan to use their capacities for the purposes of other projects in the near future.”

regional cooperation

20

regional cooperation

21

HunGary

Hungary is one of the principal countries for the geological exploration works carried out by NIS abroad. In this country, NIS conducts its business via the daughter-company Pannon Naftagas Kft. NIS’s partners in this country are Falcon Oil and Gas from Canada, and RAG from Austria. In collaboration with them, NIS is carrying out work in three exploration blocks near the border with Serbia. At present, NIS collaborates with RAG on two blocks – Kelebia and Kiskunhalas. NIS works with Falcon on the Mako Depresija block, where the drilling of the exploration well Kutvolgy-1 was completed on July 15, and the contractor was the renowned service company Drilltec from Germany. Currently, the analysis of the geological and techni-cal data is under way, based on which the well testing program will be drawn up. According to the contract with RAG, by mid-next year two more wells will be drilled, one each on the Kiskunhalas and Kelebia blocks. According to the contract with Falcon, three wells will be drilled by July 2014. NIS’s share in the production will be 50 percent from the entire area of these licence blocks.

bulGaria

The Bulgarian market is one of the priorities for the develop-ment of the premium NIS retail network in the region. In this country, a subsidiary NIS Petrol EOOD has been regis-tered, and owns at present 42 assets – the existing petrol stations or construction land. At the beginning of July, the first petrol station under the brand name of “Gazprom” was opened in Bulgaria, and by the end of the year, over 35 oper-ative “Gazprom” facilities will be opened in this country. NIS Petrol has bought a storage facility in Kostinbrod near Sofia, and thus opened up the possibility for the development of fuel distribution from Serbia using its own retail facilities, as well as for the commencement of wholesale activities.

slavko pecanac,

Director of pannon Naftagas Kft:

“The strategic development of the company in Hungary consists of the contractual completion of programs with partners, after which a technical and economic analysis is done. Naturally, the main strategic goal of all explorations is providing the resource base increase and the production of hydrocarbons outside of Serbia. However, exploration is a process in which we can obtain the final results and assess them after three to five years, which is when we will have all the data and finish the analyses. Now we can say that we have good competences as strategic partners for the devel-opment of joint business in Hungary, with companies which are world-renowned, and that we have confirmed our status as the reliable strategic partner for the joint development of business in the oil and gas sector.”

ivan kostadinov,

Director of the NIS petrol EOOD Subsidiary:

“Current activities focus on the further development of the network through the acquisition of facilities. At the same time, extensive activities are under way in the area of reconstruction and re-branding, as well as the design-ing of new petrol stations. A retail system is bedesign-ing built in the region: operation standards are being set, fuel and additional assortments of goods supplied, business qual-ity controlled, and lubricants provided by NIS for retail facilities. A dealership management system has been established.

In the territory of Bulgaria, 28 petrol stations are cur-rently operational. The wholesale of fuel directly from Serbia and from the storage facility in Kostinbrod has

been started, as well as the wholesale of lubricants from the production program of NIS and Gazprom Neft. The goal of the company in Bulgaria is to build a retail network of over 90 petrol stations by the end of 2015. The investment plan for development in the Bulgarian market is ambitious, and has been implemented according to the plan so far, despite the unstable political situation in Bulgaria since the beginning of 2013. In the upcoming period as well, the investment plans will be implemented at a faster rate, and will include new acquisitions and the building of petrol stations on premium locations. Apart from the Bulgarian capital, Sofia, these plans include major cities, basic Euro-pean corridors, highways, and border crossings.”

NIS’s partners in Hungary are

Falcon Oil and Gas from Canada,

and RAG from Austria. In collaboration

with them, NIS carries out work in

three exploration blocks near

exploration and production

22

exploration and production

23

moving

couRageouSly

towaRdS new

diScoveRieS

NIS has set forth in its

Strategy that it will not renounce

the development of Serbia’s oil and

gas potentials and that it is primarily

focused on increasing the production

and resource base which is also the

national strategic reserve and on

regional hydrocarbon explorations.

The results are certainly tangible:

oil and gas production has doubled

exploration and production

24

exploration and production

25

a new picture oF

tHe pannonian basin

Regarding exploration and production activities, the priority is still to further develop the Pannonian Basin which spans across Serbia, Bosnia and Herzegovina, Croatia, Hungary and Romania. It is expected that NIS operational capacity, application of leading-edge technologies, the experience of our experts and the knowledge of regional geological features will contribute to the success of the Pannonian Basin research programme.

Despite the fact that oil and gas explorations and exploita-tion in this area have been conducted for over 60 years, the Pannonian Basin still has significant oil and gas reserves. Continuous hydrocarbon discoveries in the region can testify to this, as well as an increased production at NIS over the past few years. The Company’s considerable investments in further development certainly add value to this, and we will accomplish new oil and gas outputs and increase reserves with the aid of new technologies.

serbia 3d

The prospective locations for 2D and 3D seismic explorations and exploratory drilling were defined under the 2011-2020 Strategic Oil and Gas Research Plan for Serbia and the Geological Research Projects. A preliminary investment plan has been formulated for this period and the preliminary budgets for oil and gas exploration projects have been allocated by 2020.

With regard to oil and gas geological research in Serbia, 2D seismic explorations (with the scope of work of 677km) and 3D explorations (342km²) were carried out at several sites in Serbia in 2012 and four exploratory wells were drilled. This year, 3D seismic operations will be conducted on more than 2000km2_{. There are also plans for drilling eight}

explora-tory wells and introducing shallow slim hole wells into NIS exploration practice.

As part of the Company’s innovation and scientific technical activities, NIS has launched the implementation of the Small Oil and Gas Reservoir Exploration by drilling slim hole wells. This is the first time that this method has been ap-plied in this region for oil and gas exploration and the project was developed by NIS Science and Technological Centre. This is a much easier, faster and more cost-effective method of discovering small oil and gas reservoirs typical for this area. Apart from its economic effects, this method is also charac-terised by its environmental aspect, given that a far smaller area of land is affected by this type of drilling and the quan-tity of drilled, i.e.mud material, used in the process. The Strategic Research Plan envisions higher oil and gas production and greater reserves for this en-ergy carrier by 2020. The overall planned investment in geological exploratory works in Vojvodina and Ser-bia south of the Sava River and the Danube River by the end of 2020 will amount to 450 million Euros.

In 2012, 2D seismic explorations

with the scope of works of

677km

and 3D explorations

342km²

were conducted at several sites in Serbia

and four exploratory wells were drilled.

Before the acquisition of NIS by its Russian strategic partner Gazprom Neft in 2009, oil resources in Serbia were believed to have been depleted and oil production had no future. Although there have been no expectations of increasing the reserves, NIS investments in new geological research and oil reservoir rehabilitation with the application of new tech-nologies and the development of complex reservoirs have brought about higher output at existing reservoirs and an increase in the resource base.

This year, 3D seismic operations will be conducted on more than 2000km2_.

Despite the fact that oil and gas explorations and production in this area have been conducted for over 60 years, the Pannonian Basin still has significant oil and gas reserves.

New

experiences

Anwar ali Alward, the Manager of the reservoir Monitoring Service, has been engaged in oil and gas reservoir develop-ment in russia for 12 years and in Serbia for a year. Here is his account of the professional experience and impressions re-garding reservoir management in russia and Serbia:

“ The geological structure of oil and gas field in Serbia, i.e. in the entire pannonian Basin, is much more complex than those where I have been engaged in russia in the past, and the insufficient study (geological diversification) of the field is an additional professional challenge

for me. An incomplete picture of the geological structure entails a completely new approach to reservoir development and a need for more complex project document preparation. This requires the application of new technologies primarily aimed at drilling deep exploratory wells, new interpretation methods, the purchase of new equipment for rock and fluid analysis and a com-plex geophysical research of the wells. By applying the findings of all of the above,we will be able to develop the appropriate geologi-cal and hydrodynamic model. ”

exploration and production

26

One of the Company’s strategic goals is efficient oil and gas production and a rational use of reserves. Over the past few years, NIS has taken a series of measures on most oil and gas reservoirs to increase hydrocarbon production.

According to Oleg Bobylev, the NIS Naftagas Scientific and Technological Centre Deputy Director, this primarily refers to drilling exploratory and directional wells, the application of simulative exploitation methods such as hydraulic fractur-ing and ESP pumps (electrical subversive centrifugal pumps), whereas the largest oil and gas quantities have recently been obtained through the geological and Technical Measures Project (GTM) referring mainly to perforating new intervals in existing wells.

Angola

NIS has been conducting busi-ness operations in this African country since 1980. In 1985, oil exploitation activities were initiated in Angola. From its establishment onwards, NIS has produced about 4.2 million tonnes of oil in concession reservoirs in Angola. In Angola, NIS currently oper-ates in cooperation with a partner group at one produc-tion block, eight fields and one exploration block, where two discovered exploratory fields are currently developed: punja and Caco/gazela,

with the Company’s share in the consortium at the blocks amounting to four per cent. Sonangol p&p is the operator at the blocks.

In 2011, NIS and its consortium partner, the Japanese company AJOCO, entered into agree-ment on performing joint lifting, which ensures higher export frequency of its oil volumes year-round.

“

The overall effect

of production optimisation,

the application of new

technologies and exploitation

methods from 2009 onwards

have yielded an additional

1.3 million tonnes of oil

in the period of four years

”

eFFicient and rational

production:

Oil and gas are produced in Serbia at 53 oil and gas fields as well as in Angola through concessions. Currently 597 oil and 98 gas wells are being exploited.

The current annual production in Serbia is equivalent to over 1.7 million tonnes of oil and has marked significant growth over the part three years. The main contributing factors to this production growth have been exploration and development drilling, new technologies applied to the pro-duction process and additional measures of geological and Technical Activities (GTA).

Technological

Development –

Looking Ahead

Introducing and successfully implementing new technologies are NIS development priorities in all areas of business op-erations, from production and refining to human resources. An innovative approach and application of cutting-edge technologies are prerequisites of progress and without them maximum efficiency cannot be achieved.

In 2009, NIS established the NIS Naftagas Science and Techno-logical Centre (STC) by merging several affiliated organisational units

(geology, geophysics, reser-voir Development, Engineering and Laboratory) to monitor the technological demands of NIS Blocks by analysing, testing and adapting the existing and proven global technologies and participating in their imple-mentation at NIS.

In addition, NIS has launched explorations of unconventional hydrocarbon resources and started developing the produc-tion and refining technology for oil shale, heavy and viscose oil in cooperation with world-class leaders in the field.

Oil and gas are produced in Serbia at

53

oil and gas fields as well

as in Angola through concessions. At this moment,

597

oil and

98

gas wells are

subject to exploitation.

oleg bobylev, Deputy Director of NTC NIS Naftagas

2008-2012

Oil Production

in thousand

tonnes of

oil equivalent

2008 2009 2010 2011 2012

865

0

250

500

750

1000

1250

1500

1750

2000

922

1,229

1,543

1,694

service

28

service

29

NIS has its own servicing capaci-ties which fully meet the Company’s requirements and also render services to third parties. The Oilfield Services Block has all the required equipment, units and vehicles necessary for per-forming these types of operations. NIS Oilfield Services are comprised of three subsidiary companies: NAFTAGAS Oilfield Services, NAFTAGAS Technical Services and NAFTAGAS Transport. Owing to the state-of-the-art equip-ment and its experienced staff, the Oilfield Services has been engaged in conducting operations in numerous for-eign countries. It is currently engaged in drilling an exploration well in Bosnia and Herzegovina, the Republic of Srpska, and carries out works in Turk-menistan. Recently NAFTAGAS Oilfield services has certified two workover units and well services to operate in the EU and Romania and established a branch office in this country, where it will soon be possible to engage our services, is currently in place.

The Oilfield Services’ priority is to en-sure high quality of its services, better technical and technological efficiency and greater engagement at NIS and other companies. The Oilfield Services’ objective is to increase its engagement in the region and on the international market.

why we need

eFFiciency

strateGic

development

This organisational unit’s strategy is primarily aimed at improving operational efficiency. According to its Director, Mr John Small, this year’s goal is for the Block to prove its capacity to work more efficiently than before. “We also need to prove that we are capable of achieving the same results as our contractors, i.e. third parties which are currently on the market with similar services, and will come to Serbia and be engaged by the Exploration and Production Block. This year, we will carry out our services’ benchmarking against the competitors on the market, in order to determine the areas in which we need to improve the quality of our services,” says Mr Small.

In addition to ongoing preparations for entering the European and region-al markets, NAFTAGAS Oilfield service

invests great efforts in upgrading equipment. There are investments in new drilling and workover equipment and well services, new leading and top-quality equipment for geophysical data acquisition has been purchased from SERCEL, as well as Top Drive - an integrated system for drilling tool rotation and working fluid (mud) cir-culation during drilling.

“

New equipment facilitates the work of field specialists,

achieving greater efficiency.

”

system

maintenance

NAFTAGAS Technical Services provides maintenance service, workover, the construction and development of equipment and units used in the oil industry. Technical Services accompany the Company’s technical tools in all operational segments: oil and gas exploration and production, drilling and well workover, as well as in refining and petroleum product sale. The maintenance strategy for techni-cal resources includes all types of maintenance: emergency, preventive, proactive maintenance and repairs. “If the parent company achieves a growth in production, maintenance units have done a good job, given that technical systems fulfil their projected function – to ensure that the system is functional (wells producing oil and gas, the refinery is in operation, drilling rigs drill etc.),” they told us at NAFTAGAS Technical Services, a NIS subsidiary. The main task was accomplished by ensuring minimum downtime of technical resources, whereas all system failures were eliminated by timely and high-quality interventions. The Maintenance Strategy entails a larger scope of preventive mainte-nance, which is intended to prevent and reduce equipment downtime as well to lower the overall maintenance costs.

John small, Director of Oilfield Services Block

why we

need eFFiciency

Service improvements and

expansion are strategic

goals in the further

development of

the Company’s Oilfield

service

30

service

31

This is what the Oilfield Services employees say about

the Improvement Programme:

Milos Delić,

the Toolpusher at the ID-5 drilling rig:

“Improving on-site conditions is highly important for us and gives us an incentive for further work. The new containers we have been provided with are much different in quality than the ones we have used so far, and we expect to replace the equipment which is extremely worn-out in order to achieve higher-quality work and be competitive. I, as the Toolpusher, spend 24 hours on the site and I sleep here, and so this new container for rest means a lot to me.”

Farkas tibor,

the Driller:

“The conditions are now much better than before. The equipment moderni-sation and the improvement of on-site working conditions certainly facilitate our jobs and increase operational ef-ficiency.”

modern veHicle pool

_{provide the following}

NIS Oilfield Services

services:

Geophysical research

drilling, completion and workover of oil, gas and water wells

special operations and measurements at wells

maintenance and overhaul of facilities and equipment, pipeline construction, installation of oil and

gas technological systems and preparatory construction works

equipment and passenger transport

The Oilfield Services’ priority is to ensure the

high quality of its services, better technical and

technological efficiency and greater engagement at NIS

and other companies. The Oilfield Services’ objective is

to increase its engagement in the region and on

the international market.

All of the three Oilfield Services

subsidiaries are certified as per the following standards:

ISO 9001:2008 - Quality Management System,

ISO 14001:2004 – Environmental Protection Management

System and OHSAS 18001:2008 – Occupational

Safety and Health Management System.

The Maintenance Strategy implies a greater scope of

preventive maintenance, which is intended to prevent

and reduce equipment downtime as well as overall

maintenance costs.

Naftagas Transport vehicles (freight, handling, specialised and passenger) are a logistical support to all NIS organisational units.

In 2012 the vehicle pool was significantly renewed: 453 vehi-cles were purchased so that currently the average passenger vehicle is about four years old.

Naftagas Transport took a series of preventive activities re-garding traffic safety esulting in the reduction of the traffic accident coefficient in 2012 by 20 per cent compared to the previous year, whereas one of the most important realised activities in this year was the installation of navigation de-vices in all vehicles. By installing a new GPS system, this NIS subsidiary has set new standards in vehicle pool manage-ment. The surveillance and control of various main vehicle parameters in vehicle operation directly contributes to reducing vehicle maintenance costs, fuel consumption and preventing unauthorised vehicle use.

reFininG

33

reFininG

32

This is not an easy task. Several of the major European oil industry play-ers operate in the Balkans. Assuming strategically important leadership and running successful operations in a highly competitive market is feasible only with leading refining facilities, the application of new technologies ensuring maximum petroleum product output with a high margin, as well as with a good and flexible logistics chain for petroleum product distribution. To achieve this, NIS has invested more

on ouR way

to the top

european Quality

FROM PANČEVO

The first phase of modernisation in Pan evo and the construction of new units for mild hydrocracking and hydrotreatment (MHC&DHT Complex) late in 2012 successfully launched the production of top-quality petrol and diesel fuel with sulphur content below 10 ppm as per the Euro 5 Standard.

With this investment project, the refining business has opened a new chapter of rapid development with new horizons regarding NIS refining capacities in Pan evo and Novi Sad.

Regarding the scope of investment, the MHC&DHT complex in Pan evo is the largest single investment over the past

few decades in Serbia.

Within just over two years, some other large investments have been completed and the following have been estab-lished as part of the MHC&DHT complex in Pan evo: Spent

Acid Recovery Unit, Sulphur Granulation Unit, Amine Re-covery Unit, Sour Water Treatment Unit and Hydrogen and Natural Gas Generation Unit.

During this period, 28 production facilities and more than 300 process plants were built. The modernisation included the construction of a new storage facility for liquid petroleum gas, the renovation of the Gas Treatment Unit, the construc-tion of a state-of-the-art substaconstruc-tion, a new nitrogen staconstruc-tion, a new measurement and regulation station for natural gas and a new hydrocarbon flare, as well as the upgrade of all petro-leum product loading/unloading stations at the terminal and railroad and product shipping from the Danube jetty.

The overall investments in the refining infrastructure exceed 140 million euros.

EURO 5

than 540 million Euros in the first phase of modernising its refinery over the past four years, with the par-ticipation of its majority shareholder, Gazprom Neft.

Investing in the refining business is a step towards implementing the NIS Development Strategy - to become a leader among the regional energy companies by 2020, with one of the most efficient refineries in Southeast-ern Europe.

The development of the refining industry which followed

the 2008 Interstate Strategic Cooperation Agreement

between the Russian Federation and Serbia, the successful

completion of the first phase of modernisation, and the

construction of a mild hydrocracking and hydrotreatment

unit in Pancevo have ensured a steady production of

top-quality petrol and diesel meeting the Euro 5 Standard.

The second phase of modernisation is under way and is

sure to achieve the Company’s goal - to be the leader in

this part of Europe with its refining business among

Refining

34

Refining

35

reGional market

leader

With the newly built facilities in Pan evo, the projected annual

refining capacity totals about 5 million tonnes refined, which fully meets the Serbian market demand and ensures the export of top-quality products into neighbouring countries. Newly built production capacities ensure the production of more than 638 thousand tonnes of Euro Petrol and more than 1.5 million tonnes of Euro Diesel a year, which is much more than before the implementation of the modernisation pro-gramme. NIS refineries produce a wide range of other oil and natural gas products which fully meet international quality standards and manufacturing specifications: automotive and aircraft fuel, liquid petroleum gas, heating oil, various types of industrial and road bitumen, including polymer bitumen, oils and lubricants, petrochemicals and other products.

This year’s Refining Plan will exceed 3 million tonnes refined, and according to the Company’s Development Strategy and regional market expansion, the annual scope of refining will have reached 5 million tonnes by 2020.

In addition to a transfer to environmentally-friendly fuel production as per the Euro 5 Standard, the first phase of upgrading the Pan evo Refinery has also resulted in the

increase of white product volume production to more than 70 per cent, and the crude oil refining depth is nearly 10 per cent higher as well, now reaching almost 80 per cent. All the above mentioned has enabled NIS to have the largest share in open competition on the Serbian market. Owing to its high-quality products from the Company’s modernised refining facilities, it is on the route to assume leadership on the Southeastern European market.

What has the modernisation

brought about?

NIS has invested more than

540,000,000

Euros in the first

phase of upgrading its refining business over the past four years.

Increased production of white products to more than

70%

and greater depth of crude oil processing by nearly

10%

(now it amounts to

80%

)

producing automotive and aircraft fuel, liquid petroleum gas, heating oil, various types of industrial and road bitumen, oils and lubricants, petrochemicals and other products

This year’s Refining Plan will exceed

3,000,000

tonnes refined, and

according to the Company’s Development Strategy and regional market expansion, the annual oil refining volume will have reached

5,000,000

refined tonnes by 2020.

producing top-quality petrol and diesel fuel meeting the Euro 5 Standard with sulphur content below

10 ppm

(more than

638,000

tonnes of Euro petrol and over

1,500,000

tonnes of Euro Diesel a year) Annual refining

capacity of nearly

5,000,000

tonnes refined

NIS now supplies

74%

of consumers in the open competition on the

Serbian market. One of the advantages of NIS refining

facilities in two cities in Serbia, namely Pančevo and Novi Sad, is their excellent geographical location: they are located on communication routes which are highly favourable for this industry.

NIS refineries are located on the banks of the Danube, which enables river transport, with railroad transport also available within close proximity. Furthermore, NIS has a widespread network of petroleum product storage facilities and a sizeable vehicle pool (both passenger and railroad) which is undergoing modernisation and optimisation with a single aim to achieve European supply chain standards. In addition, NIS refining facilities are already on the market with huge possibilities for marketing petroleum products locally and regionally.

Exporting top-quality products

into regional countries

SaleS and diStribution

36

SaleS and diStribution

37

The Sales and Distribution Block is what characterizes NIS, what creates profit, but also what represents the Company in its true essence – it is what consumers are in touch with every day. NIS wholesales crude oil in the Serbian market and, for the purposes of export, sells gas and petroleum products, and on top of that, the Company has its own retail line of market-ready petroleum products, liquefied petroleum gas and an array of accompanying products.

The key activity of the Sales and Distribution Block is retail sales. NIS owns the largest retail network in Serbia and is the leading supplier of petroleum products on the Serbian market. Petrol stations are the first point of contact with the consumers, so their operation is a direct reflection of the

im-niS

FRom

the

land

to the

SkieS

traFFic

37

age of the company and the way it conducts business. The retail sector of NIS has in recent years had good results, despite the crisis in the country and the region, as well as the diminishing Serbian retail market. In 2012, the volume of re-tail sales increased by 15 percent. The increase of NIS’s shares in the retail market was 5.9 percent, while the share of other companies in the retail market has been dropping yearly. As a consequence of rebranding and the increased work efficiency in 2012, the daily sales of petroleum products at NIS petrol stations have grown on average by about 38 percent. The mean annual volume of sales is about 2.5 million tonnes, which covers 50 percent of the wholesale market, 34 percent of retail sales, and about 68 percent of the entire petroleum products market in Serbia.

At present, NIS can

showcase the largest and

most modern retail network

in Serbia, which has been

actively expanding in the

region in the past year.

The Company supplies

European-quality fuel

not only to drivers in the

Balkans, but also to aircraft

SaleS and diStribution

38

SaleS and diStribution

39

we run tHe

serbian sky

In addition to retail sales, NIS is a national leader in supplying aircrafts with fuel, which is one of the older activities of the Company. The fact that over 92 percent of aviation fuel sales in Serbia are done through NIS is testament to the involvement of the Company in this segment of the market.

Supplying aircrafts with fuel at two in-ternational airports, in Belgrade and Niš, is one sales channel, the other one being the export of aviation fuel to neighbour-ing markets, first and foremost to the markets of Romania and Hungary. The quality of jet fuel produced by NIS is in line with Serbian and international standards regarding this type of avia-tion fuel. Jet fuel is intended for the majority of aircrafts, passenger planes and cargo planes, and is produced in sufficient quantities at the NIS refining facilities. In addition, NIS offers avgas, which is obtained through exports and

is mostly used in agriculture and for business aviation and aviation training. All major airline companies with regular flights from the Belgrade Airport Nikola Tesla, such as Lufthansa, Air France, Alitalia, Turkish Airlines, Wizz Air, Aeroflot, and others, are supplied by NIS. The biggest buyer of aviation fuel is the national airline carrier Air Serbia (former JAT) which NIS has been col-laborating with for many decades.

39

tHe reGion as

a priority

The fact that subsequent to the modernisation of the refining complex in Pan evo NIS started to produce Euro-5 standard

fuel, and that the refining capacity is about 5 million tonnes refined on the annual level, allows NIS to export petroleum products of the highest quality to countries in the region. In accordance with the strategic goal of becoming the leader in the region, NIS is opening petrol stations in neighbouring countries – Bosnia and Herzegovina, Bulgaria, and Romania. One of the priority markets for the development of the NIS retail network in the region is the Bulgarian market, where the Company is present with the Gazprom premium brand. The first Gazprom petrol station in Bulgaria was opened in July this year. NIS plans to start the operation of over 40 Gazprom petrol stations in Bulgaria by the end of the year, and to build a network of 80 retail facilities by the end of 2015. Besides petrol stations, NIS owns a storage facility for petroleum products in this country.

Another country that NIS is targeting at with its premium Gazprom brand is the neighbouring Romania. In this coun-try, the Gazprom network currently has 12 petrol stations, and by the end of the year the Gazprom network in Romania will include over 50 petrol stations. The plan is that in this country, by the end of 2015, over 120 petrol stations will be opened, which will be located along the international and national public roads, as well along thoroughfares in major cities.

In Bosnia and Herzegovina, besides the existing NIS Petrol brand, with eight petrol stations in the Republic of Srpska, the Company extended its retail network with the premium petrol stations under the brand name Gazprom. Today, 28 petrol stations operate throughout Bosnia and Herzegovina under this brand name.

As the Chief Executive Officer of NIS, Mr. Kirill Kravchenko, said that the development of retail sales in the region repre-sents one of the priority business directions.

“Opening Gazprom petrol stations is yet another step on the road to the development of a unified retail network of the Company in the Balkans. The appearance in the market of a brand which is well-known to the buyers, and confidence

pavinG tHe way

to europe

Apart from high-quality fuel, NIS also produces bitumen in its Pan evo

Refinery, according to the highest EU standards. NIS has already become the leading exporter of this petroleum product to Romania and Macedonia, and given the fact that Romania is the greatest consumer of bitumen and has no production of its own, it is clear what sort of challenge this poses for NIS. Besides these countries, NIS exports bitumen to Bulgaria, Bosnia and Herzegovina and Croatia. Direct delivery by means of tank trucks first began in the territory of the Kosovo. In order to be in the proximity of foreign partners who buy bitumen, renting regarding the quality of our products will contribute to the

realisation of the strategic goals of the Company – to become one of the leaders in the area of petroleum products sales in the region,” said Kirill Kravchenko.

One of the strategic goals of NIS is to sell five million tonnes of petroleum products a year by 2020. Given that these are greater needs than what the Serbian market can absorb, but also taking into account the fact that NIS is in the game of being a regional player, what is key is the development and expansion of the regional retail network. It is planned that, by the end of 2015, more than 250 petrol stations will be operat-ing under the brand name of Gazprom in the Balkans, and that the entire retail network of NIS in Serbia and the region will have as many as 800 facilities in the medium term.

nis on tHe

river

Even though it has come later than the rest, supplying river vessels with fuel is an important and promising business direction for NIS. Owing to its geographic location, Serbia has a major strategic resource – the Danube – which has always been a trans-European artery. On the one hand, thanks to its rich culture, Serbia is an interesting destination for tourists travelling on the Danube. On the other hand, the Danube has enormous po-tential because of the increase in sales of goods. It is for these reasons that in Serbia and its surroundings there is a great degree of river transportation, which requires a bunkering service. In line with this, it is the goal of NIS to cover the entire navigable waterway of the Danube through Serbia. Apart from the two bunker stations which are already operational and where two independent lines work, dedicated to both the local and the international market, three more Danube terminals are planned. Serbia B&H Croatia Hungary Romania Bulgaria

warehouses in the said countries is un-der consiun-deration, so that bitumen could be stored there and thus be available to consumers at all times.