Energy deals with Serbia historic – Medvedev

Russia and Serbia have signed oil and gas cooperation deals.The agreements have already been labeled ‘historic’ by the Russian president Dmitry Medvedev.

“We have just finalised the package of energy agreements which unites Russia and Serbia,” he said.“I believe that it is quite symbolic that it took place ahead of a year which will bring more options for the development of our economies and for providing energy security for both our countries and Europe.”

The Russian leader went on to add that deals like these “help to boost economies during the hard times we face at the moment.”

Key energy projects

The major result of the talks is the purchase by Russian energy giant Gazprom of a controlling 51 percent stake in the Serbian national oil company Naftna Industrija Srbije (NIS) for 400 million euros. The Russian company has also pledged to invest another 500 million euros in NIS by 2012.

Previously, Serbia had tried to almost double the NIS price of 400 million euros but recently abandoned these attempts.

Gazprom Neft President Alexander Dyukov told Interfax that the company will finalise the deal by May 1, 2009.

Following the Kremlin agreement, Gazprom will send a petition to the Serbian anti-monopoly office to obtain clearance for the transaction. It will then take 130 days for the office to consider the request.

Once NIS sites are modernised, they will be capable of producing all types of fuel, from high-octane petrol to fuel oil of the euro 5 standard, and thus compete with European rivals.

Gazprom and its Serbian partners are to set up a joint venture in the second half of 2009 to lay the 400-kilometre segment of the South Stream pipeline across Serbia. The sides have signed the terms and conditions of the basic co-operation agreement on the project.

In addition, Gazprom and the Serbian state-owned company, Srbijegas, have signed a memorandum of understanding on the construction of an underground gas storage facility at Banatski Dvor, the commissioning of which will increase Serbia's energy security.

What is South Stream?

South Stream is a joint project of Gazprom and Italy's Eni, intended to deliver Russian and, possibly, Central Asian gas to Europe across the Black Sea.

The sea segment of the prospective pipeline will connect the Russian Beregovaya compressor station to the Bulgarian seaport of Burgas. It will be 900 kilometres long and lie at a maximum depth of 2,000 metres

The land segment will be divided into two parts. One will head south-west through Bulgaria and Greece to Italy, while the other will go to Bulgaria to a hitherto unknown destination.

Russia signed bilateral deals with Bulgaria, Serbia and Hungary on the construction of the gas pipeline segments through their territories in January and February 2008. The deals with Bulgaria and Hungary will be implemented on parity terms, while in the deal with Serbia, Russia will hold a 51% stake, while Serbia will have 49%.

It is estimated that the pipeline will carry 30 billion cubic metres of gas per year and the cost will exceed US$ 10 billion. Gazprom plans to complete the market research and draft the feasibility study of the pipeline by the end of this year. deliveries are expected to start in 2013.

Benefits for Serbia

By allowing the construction of the gas pipeline, the Serbian government will achieve three goals.

Firstly, Serbia will integrate into a large European infrastructural project and become a transit country. Secondly, Serbian regions will receive sustainable gas supplies in winter. Thirdly, the construction of the gas pipeline and the privatisation of Naftna Industrija Srbije will spur on the development of the energy and related sectors of the national economy and bring billions in benefits.