2015. GODINA ŠTEDNJE

I VELIKIH IZAZOVA

NOVA TEHNOLOGIJA

U SRPSKOJ ENERGETICI

Izgradnja termoelektrane

u Pančevu

Health of employees, contractors, third parties and local population always come first. Year in year out the Company demonstrates this by diminishing the negative impact on human health by perfecting HSE culture. The year of 2016 has been declared by the Company an HSE Year as NIS seeks to demonstrate that the concern for health and safety, as well as commitment to environment protection are the Company’s top priorities.

REFINING2 REFINING 3

CONTENTS

NEWS&TRENDS4-9

24The Years of Large Cuts

44Security of Supply

48Gas Field in thespotlight of theglobal expertcommunity

58Competitiveness in the Balkans

50-51Industrial Safety and Crisis ManagementNIS&EU

52-53Mineral fuels quality monitoringINDUSTRY&BUSINESS

60-63Spring promotions of new productsPROMOTIONS AND MARKETING

INDUSTRY&BUSINESS The Years of Large Cuts

24-31

DOSSIERFuel for Cleaner Planet

18-23

10-15

COVER STORYNew HSE Vision

Gas Field in the spotlight of the global community 48-49

NIS&EU

Push Button to Activate 32-37

INDUSTRY&BUSINESS

Security of Supply44-47

EU MARKET

EnergizeThe international magazine of NISIssue 8, May 2016. Published by:NIS, Novi Sad, SerbiaPublic Relations and Communication DepartmentFpr@nis.euPhone +381 21 481 3991

ISSUE

8Y: 2016

MARCH

APRIL

MAY

INTERNATIONALMAGAZINE

Editor in chief: Nenad Stanojevski

Translation: Branislav Šiljković, Olgica Angelovski, Svetlana Petrov, Nebojša Vučinić

Art direction and design byMetaklinika

Illustrator: Metaklinika, Sergej Tucakov (24-25, 27),Monika Lang (54-55)

Photographers:HNS CREATIVE

Print:„Stojkov” Energize Magazine is published quarterly. Copyright © 2016 NISwww.nis.eu

This magazine is printedon paper from responsiblymanaged forestsThe mark of responsible forestry

10New HSE Vision 2015.

GODINA ŠTEDNJE I VELIKIH IZAZOVA

NOVA TEHNOLOGIJA

U SRPSKOJ ENERGETICI

Izgradnja termoelektrane

u Pančevu

MINI INTERVIEWUlrich Peball, Director of HSE Function

16-17

NIS has joined the club of the best 38-43

INDUSTRY&BUSINESS

54-57General Conclusions and Committements ENVIRONMENT

58-59Competitiveness in the BalkansREGION

NEWS&TRENDS4 NEWS&TRENDS 5

The vehicles are manufactured by world-renowned producers and have outstanding design features including Euro 6 engines,

which are environmentally-friendly and help reduce fuel consumption.

NIS Revamps Its Car FleetNIS has yet again revamped its vehicle fleet, buying eight new latest-model tank trucks for the carriage of white petroleum products, primarily aviation fuel, because of increased demand for this type of service in the fuel market and as part of its programme for mod-ernisation of transportation resources.

The vehicles are manufactured by world-renowned producers and

have outstanding design features including Euro 6 engines, which are environmentally-friendly and help reduce fuel consumption.

By purchasing the vehicles, NIS is not only investing in the moderni-sation of vehicle fleet, but is also promoting environmental protection and improving energy efficiency and traffic safety, while taking care to maintain the quality of petroleum products during transportation.

In addition to that, Sales and Distri-bution has recently purchased a new

locomotive for heavy-cargo han-dling at the Pančevo Oil Refinery, to ensure the safety of heavy-cargo handling as well as of the reception and dispatch of tank carriages at the Pančevo Oil Refinery.

NIS’ locomotive was made by a Czech “CZLoko” company. This locomotive is steered based on data provided by the sensors of electricity, voltage, revolutions, sliding and set param-eters, as well as by the excitation of the traction alternator so as to achieve the required sequence of load-voltage properties.

OHSAS certificateOn 25th March, pursuant to stand-ards SRPS OHSAS 18001:2008, Sales & Distribution, in association with the representatives of HЅE Function and Department for Certification and Maintenance of IMS, success-fully completed the second regular supervisory examination of occupa-tional health and safety protection system management.

NIS presents Q1 2016 performance resultsIn the first three months the Company posted a net profit to the tune of RSD 261 million, which is a significantly better performance than in the same period of the previous year, when a RSD 4.7 billion loss was posted. The accomplishment of these results was significantly facilitated by the compre-hensive programme aimed at boosting operational efficien-cy being consistently implemented across the board.

Notwithstanding unfavourable macroeeonomic situation, NIS continued investments and in the first three months of this year a total of RSD 4.6 billion was invested, most of it into the oil and gas exploration and production. The unfavourable macroeeo-nomic conditions have, however, affected EBITDA indicator, which amounted to RSD 3.8 billion, i.e. 48 per cent less than in the first three months of 2015. Concerning the operational performance indicators, NIS succeeded in boosting the overall sales of oil products to 701.000 tonns, which is by four per cent

Successful Completion of Further Pančevo Refinery Modernization

NIS’ Pančevo Oil Refinery has successfully completed investment operations in some of its processing facilities. Further mod-ernization has boosted the efficiency of the Refinery’s production and strength-ened the reliability of its operation. Other than that, the facilities are now absolutely capable to operate steadily and reliably in high temperatures in summer time, when an increased output is planned for the best quality Euro 5 standard products intended for local and foreign market.

Total cost of this investment overhaul is around RSD 30 million, and the operations have been completed at the following refinery plants – atmospheric and vacuum distillation, at the plants for second-ary processing – plants for mild hydro-cracking and hydro-treatment (MHC/DHT), plants: Hydrogen, Platforming and production unit of gas treatment, which output Euro 5 quality products.

Being a socially responsible company, NIS has completed the entire operation in compliance with the stringent environ-mental and occupational safety stand-ards, and over the course of this further revamp of the refinery plants the market was duly and promptly supplied with all types of oil products. NIS will continue the

more than in the first three months of 2015. In parallel, a two per cent growth in Serbia’s retail market share was posted. Foreign assets have accomplished exquisite results as well, with a 36 per cent growth in the sales of oil products. The total scope of refining of crude and semi-products is bigger by 13 per cent than in the first three months last year and amounts to 776.000 tonns. Production of oil and gas has reached 377.000 tons of oil equivalent and it exceeded the projections.

On the occasion of the publication of the performance results in the first quarter of 2016, Kirill Kravchenko, the CEO of NIS made a statement: “The anticipation of underperformance in comparison with the prefious year due to unfavourable world market trends, has not come true. Our company has not only maintained its profitability, but improved its performance in many areas of its business. This was made possible as we adhered to the continued implementation of the programme boosting operational efficiency, and kept investing into the company development. We intend to continue going along these lines in the coming period, as the crisis plagueing the oil and gas industry is not yet over and the first quarter confirms that 201 will be awash with huge business challenges.”

upgrade of the operation of the Pančevo Oil Refinery, proving in this way that fur-ther development of the refining is set as one of the most important priorities of the company.

In the first three months of this year alone the effect of the completed operational

efficiency measures amounts to

RSD 1,3 billion

which largely facilitated the maintained profitability of NIS group.

Supervisory examination was con-ducted by a certification authority TMS CEE, whose auditors spoke highly of the occupational health and safety protection system management func-tioning witin Sales & Distribution.The possession of OHSAS certificate, especially in 2016, that has been del-cared by our company the HЅE year, is yet another acknowledgement of the strong commitment to employees’ occupational health and safety in their daily routine.

NEWS&TRENDS6 NEWS&TRENDS 7

Balkan Trafik Festival with the Support of NISThe tenth festival dedicated to promo-tion of the culture and art of the Bal-kans, Balkan Trafik, took place in Brus-sels on April 14 – 17 with the support of NIS. For the fourth year, NIS supported this unique cultural event.

As every year, on the first day of the festival, in cooperation with the Embassy of the Republic of Serbia in Belgium, Serbian Mission to the Euro-pean Union and representative office of the Serbian Chamber in Brussels, NIS hosted a cocktail that was at-

of the festival and held a master class, which was followed by the screening of one of his most famous movies “The Underground”.

tended by the European officials, the diplomatic corps, company’s friends and performers of this year’s festival. NIS is one of the largest companies in the Balkan region, which in addi-tion to Serbia, also operates in Bosnia and Herzegovina, Hungary, Bulgaria and Romania, and the support to the Balkan Trafik festival is an expression of the desire to promote the culture and values of the region at the head-quarters of the European Union. At the same time, NIS is one of the first com-panies in Serbia, which has opened a representative office in Brussels.

This year, a celebrated film director and double “Palme d’Or” winner, Emir Kusturica, appeared as a special guest

“Gazprom Neft” supports painting of the interior of St. Sava Temple in BelgradeAs part of the implementation of the programme aimed at facilitation of culture and preservation of Serbia’s historical heritage, “Gazprom Neft” will finance painting of the interior of St. Sava Cathedral in Belgrade. A total of four million euros will be invested in the project. The Saint Sava Cathedral is an important architectural monument, the largest Orthodox church in the Balkans, and on of the largest int he world. Since 2009, concurrently with invest-ing in the national economy of Serbia, “Gazprom Neft” has also been imple-menting a broad range of programs supporting the projects in the area of culture and preservation of historical heritage of the country. In addition to

the projects aimed at preserving the historical heritage of Serbia, the com-pany “Gazprom Neft”, together with film director Emir Kusturica, every year organizes the festival of Russian classical music “Bolshoi”, and supports the Film Festival “Kustendorf”.

“By becoming the majority share-holder in the Serbian oil company NIS, “Gazprom Neft” became not only the largest foreign investor in

Students from Yale University visit NISStudents of a world prestigious Yale School of Management visited NIS on 17 March. Kirill Kravchenko, the CEO, held a presentation to the students of Master’s program at this School, presenting NIS as a leading energy company in the region, and explain-ing the current situation in the oil and gas sector globally and in the Balkans, the latest trends in environmental protection, and presenting the most important business results of NIS and Gazprom Neft. During a daily visit to

NIS Continues to Invest in the Development of Local CommunitiesIn 2016, NIS will continue to support the projects through a system of public competitions, which contribute to the development of local communities. As a part of the Together for the Community corporate program, the agreements were signed with Novi Sad, Čačak, Niš, Pančevo, Zrenjanin, Kikinda, Kanjiža, Srbobran, Žitište and Novi Bečej. This year, NIS will allocate 110 million dinars for projects aimed to support these local communities. Other than that, Agreement on Coopera-tion, based on which the company NIS will continue to invest

in the development of the City of Belgrade through the pro-gram "Common Cause – Community", was also signed. In this way NIS and the City of Belgrade continue their successful cooperation, and Belgrade-based associations and institu-tions will again this year be provided with an opportunity to compete with their projects in the area of sport, culture, en-vironmental protection, science and help to vulnerable social groups. NIS has allocated 20 million dinars for the funding of projects.For eight consecutive years, the Company supports cities and municipalities in Serbia through the Together for the Community program. Since 2009, almost 800 million dinars have been invested in approximately 760 projects that helped the development of local communities, facilitated the functioning of many institutions and improved the work of cultural, educational and sports institutions across Serbia.

Serbia, but the greatest benefac-tor and sponsor of projects relevant to the country. Participation in the reconstruction of St. Sava Temple is a new phase in the implementation of our great humanitarian program in Serbia. We are confident that the restored temple will become the main symbol of centuries-old Russian and Serbian friendship”, said Alexan-der Dybal, member of the Executive Board of “Gazprom Neft”.

NIS, about 30 students of Yale MBA program visited Pancevo Oil Refinery where they had an opportunity to see one of the most advanced plants of this kind in the region where Euro 5 fuel is produced. In the course of their visit to the refinery the students saw a mild hydrocracking and distillate hydro treating (MHC / DHT) complex for motor fuels, the investment which enabled NIS to gain a strategically im-portant leadership position in the re-gional petroleum product market, and ensured energy stability for Serbia.

On their way back to Belgrade, the students visited a modern GAZPROM petrol station "Dunav" from the pre-

mium segment of NIS petrol stations in Serbia and the region, and had an op-portunity to see for themselves what quality of products the company offers to its clients.

This year, NIS will allocate

130 milliondinars for projects aimed to support

local communities and City of Belgrade.

Gazprom Neft Reports 2015 Performance Results The Company has published its consolidated financial results in ac-cordance with International Finan-cial Reporting Standards for 2015. Increased production, consistent sales

Russia’s Best Employer

Up two places on its 2014 perfor-mance, Gazprom Neft has won first place in the 2015 Russia’s Best Em-ployers rankings, held by recruitment company HeadHunter and published this year in association with RBK-Daily. The company has participated in these rankings, as well as the annual

HR Brand Awards, since 2012, seeing a consistent improvement in its rank-ings every year. The company’s “Let’s Do Gemba!” project won third prize in the “Federation” category in 2015, as well as receiving a special “Client is always right” nomination, awarded for those HR projects showing significant improvement in their client focus. Gazprom Neft will, in 2016, be sponsor-ing its own nominations category, “New Approaches”, recognising those HR-brand initiatives showing the greatest innovation in HR and recruitment.

of petroleum products and efficient management drove an improvement to adjusted EBITDA, which increased 18.2% Y-o-Y to RUB 404.81 bln, offset-ting pressure from the tax manoeuvre introduced at the start of 2015 and the export duty lag. Hydrocarbon produc-tion in 2015 reached 592.21 MMboe (79.7 MMtoe), a 21.3% increase on 2014 performance results, whereby the Company also compensated produc-

Revamped Drilling Support Centre Operational

Following full refurbishment and re-equipment, the Gazprom Neft Drilling Support Centre (part of the com-pany’s Joint Scientific and Research Centre and responsible for round-the-clock monitoring of the company’s most high-tech wells) is now operational. The Drilling Support Centre is the only such facility in the Russian oil and gas industry able to provide specialist geological and techni-cal support in the construction of high-technology wells — which, as at late-2015, now comprise 40 percent of the Gazprom Neft portfolio (the highest such proportion among domestic oil and gas companies). The Gazprom Neft DSC has been designed with a view to ensure a tight cooperation of geologists and drilling-technology specialists.This pooled effort of experts is supporting hands-on decision-making as information on reservoir characteristics and other well-data comes to light. The real-time collaboration between geologists and technologists within a single organisation is unique within Russia’s oil sector, significantly improving the

10-Millionth Barrel Of Oil Produced At Prirazlomnoye Field

the 10-millionth barrel of oil was produced at the Prirazlom-noye oilfield — located on the Russian Arctic Shelf in the Pe-chora Sea and currently under development by Gazpromneft Shelf. Shipment of this landmark barrel was completed by the Mikhail Ulyanov tanker on 10 March, the 22nd consign-ment since commercial production started at the field. The transportation of products from the Prirazlomnaya rig is effected by two double-hulled ice-class (Arc6) oil tankers, the Kirill Lavrov and the Mikhail Ulyanov, able to guarantee the safe delivery of crude produced. Both were built at the Admiralty Shipyards, St Petersburg, specifically to en-sure the year-round transportation of oil produced at the platform under Arctic conditions and launched in 2009. he 10-millionth barrel of oil is a major landmark, proving that oil production on the Arctic Shelf can be both safe and viable. Gazprom Neft is pushing ahead with opening up the Prira-zlomnoye field, with the production and shipment of hydro-carbons running to schedule.tion volumes by 279% of new reserves.

The increase in production was pri-marily driven by continued production growth at SeverEnergia (Arktikgaz), the Orenburg fields and the Prirazlomnoye field, as well as the Company’s larger share in Northgas and cutting-edge production technology implemented at mature fields. Light oil product output remained at 2014 levels despite a marginal 0.9% decline in refining.

company’s efficiency. Among other things, the year of 2015 saw Gazprom Neft complete the construction of 359 new wells throughout its own fields (an increase of 20 percent on 2014), with multi-stage fracking undertaken at 254 of these (50 percent more than the previous year) — this increase in the proportion of high-technology wells being part of the company’s new Technology Strategy.

NEWS&TRENDSNEWS&TRENDS8 9

NEW HSE VISION

Health of employees, contractors, third

parties and local population always come first. Year in year out the Company

demonstrates this by diminishing the negative impact on human health by

perfecting HSE culture. The year of 2016 has been declared by the Company an HSE Year as NIS seeks to demonstrate that the concern for health and safety, as well as commitment to environment

protection are the Company’s top priorities.

Nenad Stanojevski

HSE Year

COVER STORY 11COVER STORY10

COVER STORY12 COVER STORY 13

There is an incessant talk of business plans, projects, promoting new products and implementation of new technolo-gies. However, safe operating conditions are among Company’s strategic objec-tives, consequently an integral part of its expanding and development. This not only brings potential adverse production effects to the least possible level, but also ensures maximum efficiency result-ing from stringent production discipline.

ExxonMobil financial results improve-ment, is a direct result, as the company top executives think, of the safety man-agement system implementation.

The Company continuously adheres to the principles of prevention with a view to improve working conditions and reduce adverse HSE incidents. Top management, as well as managers of all levels lead the way in occupational safety and health

Extensive international experience proves that safe business operation is synonymous with successful business operation. Safety indicators go hand in hand with business operation results. The application of stringent procedures along with dutiful implementation of this system brings about an almost across-the-board upgrade of business operation, both financial and produc-tion indicators growth. For example,

and HSE improvement. This process ought to raise employee awareness of HSE importance and responsibility of each and every employee for their own safety, as well as provide educa-tion related to possible risks and measures that might prevent undesirable incidents. “NIS j.s.c. HSE Policy” and “Statement on HSE policy” are Com-pany’s in-house “Codes” of sorts the, and by putting them into practice adverse impacts are prevented and human health and environment protection are constantly improved.

When environment is concerned, responsibility is reflected in maximised efforts aimed at its protection, which is achieved by way of sustainable management – prudent tapping into natural resources and implementation of renewable energy sources, investing into those production processes, which contribute to decreased pollution of air, soil and bodies of water, rapid and appropriate mitigation of accidents when they occur, remedia-tion of historical pollution and soil rehab or tation; multiple use of water abstracted; minimization of waste generation and permanent disposal of waste in accordance with its type; energy efficiency boost; concern about biodiversity and protected areas.

Occupational safety boost is also part and parcel of Com-pany development. It diminishes risks, while bringing about maximum efficiency stemming from stringent production

Safety indicators go hand in hand with business operation results. The application of stringent procedures along with

dutiful implementation of this system brings about an almost across-the-board upgrade of business operation, both

financial and production indicators growth

Safety and Ecology – new corporate value in Gazprom Neft “Efficient occupational safety management system is a prerequi-site for “Gazprom Neft” to become a serious player in the world oil industry. The scope and scale of our business operation has been on the rise, we have been successfully coping with tech-nological challenges. We can take pride in lots of our accom-plishments, our plans being ambitious. For this very reason we cannot afford a mistake, loss of concentration, negligence or an unfortunate turn of events that would result in injuries of people, or even a fatality, property damaged, making losses, inflicting damage to environment, and through this impair our reputation. And then be forced to allocate huge funds and time to mitigate the aftermath of these incidents. Company has achieved a lot in streamlining HSE. However, I am very well aware that at this very moment as we speak the life of some of our workers or contrac-tors, the life of people in the surroundings, our property in some of our facilities or the surroundings is exposed to a great risk. Occupational safety level has been, beyond any doubt, constantly on the rise due to the efforts of all Function staff members and Blocks production initiatives. However, if we look at the pace of these indicators, we will understand that the progress made is not sufficient. It is evident that both we and contractors need a fresh impetus. This is why we started a HSE culture streamlin-ing project and drafting a new strategy of its development. We have defined a new corporate value and entitled it “Safety and Ecology”. We set complex tasks for the company – our aim is that nobody is put under risk during the execution of works – not the people, not the environment, nor production facilities. This means that there should be neither an accident nor a disaster that cannot be avoided.”

Aleksandr Dyukov, Executive Board Chairman of Gazprom Neft

“NIS j.s.c. HSE Policy” and “Statement on HSE policy” are Company’s in-house

“Codes” of sorts the, and by putting them into practice adverse impacts

are prevented and human health and environment protection are constantly

improved.

COVER STORY14 COVER STORY 15

discipline. High standards of industrial safety and health protection have been continuously applied, in compliance with global trends and regulations.

Anyone, who, even for a moment, be-comes involved with NIS system, must be provided with maximum protec-tion and minimum exposure to risk. „Target 0“ – zero occupational injuries in employees and third parties, zero NЅE incidents, maximum care of surround-ings – all these are the highest priorities that the Company sets before its busi-ness operation.

STREAMLINING HSE CULTURE

With a view to raise the level of occupational safety and streamline HSE culture across the Gazprom Neft group, the parent company of NIS, this year was declared a “HSE Year“. An efficient HSE system is a prerequisite for “Gazprom Neft” to become a serious player in the world oil industry. Occu-pational safety level has been, beyond any doubt, constantly on the rise due to the efforts of all Company staff members. However, the pace of progress leaves much to be desired. This prompted the Gazprom Neft management to come to a con-clusion that both Company staff members and contractors need a fresh impetus. This was the very reason that gave rise to the implementation of the HSE culture streamlining pro-ject and drafting a new strategy of its development. This is why a seminar has been organised for Company top manage-ment at which the leaders determined a vision, priority areas and assumed personal HSE obligations. Following this, in the “second wave”, workshops were held for the second and third levels of management, which is subsequently to be cascaded down to every employee.

Company has assumed an obligation to put into practice the “Target 0” vision. The Company shall endeavour to meet this target of zero injuries and hazard for people, environment and property in work execution. Other than that, the Com-pany has introduced a new value: “Safety and Ecology”, which

Keith Perrin, a “Bain” Company expert with a long-term experience in

„Shell“

“ In Shell they consider that HSE indicators and production results are

inextricably intertwined. The achievement of good

results requires clearly defined obligations,

formulated anticipation and compliance with them.

This, in turn, requires a candid and respectful treatment of employees

and fair business management. It is my

belief that managers play a pivotal role here. ”

Greg Coleman, a former BP HSE expert and part of the “Bain” Company HSE expert on

safety culture change

“ It is essential for any company to clearly see what its current stage of

development is in order to implement a programme that brings about a

systemic progress from one level to another. Frankly speaking, it is quite

difficult to make this progress. We do not recommend jumping from the second to the fourth level, before you made

sure that you implemented all crucial elements in each of these stages. ”

will be included in Gazprom Neft Corporate Code. With a view to accomplish the new vision, Company management has determined five HSE areas as priority to actively pursue in the coming period, specifically: “Leadership and Culture”, “Risk Management”, “Equipment Reliability”, “Contractors Management” and “Safety in Transport”.

The base of a safe and healthy environment is our awareness of hazards that might pose a threat to either us or our environment, as well as to take appropriate steps to

keep these risks in check

SUCCESS INDEXLast year, NIS was successful HSE-wise. Data analysis, i.e. comparison of data reflecting HSE indicators value registered in 2015 with the previous year, suggests that there has been a significant improvement across the board. Occupational injuries frequency Index has been reduced by 50% on the last year, which is the result of pool ef-forts of all employees. 2016 poses new challenges for the control of HSE risks, with a view to make the Company a

healthier, safer and better place for the operation of all employees, workers on lease from other companies, as well as visitors, who either operate or stay on company premises. The essence of safe and healthy surroundings is the awareness of hazards that might pose a threat to either us or our environ-ment, as well as to take appropriate steps to keep these risks in check. If all hazards we might be exposed to are identified, there will be a breakthrough in preventive HSE approach and possib or ty of accidents occurrence is signifi-cantly diminished.

INTERVIEW16 INTERVIEW 17

At the beginning of this interview, can you give us a brief summary of HSE results for the last year; was it successful and which are, according to your opinion, the most positive examples?

For me, the most important result in 2015 was the reduced number of incidents by 50 % - in 2014 there were 110 injured colleagues of ours, and in 2015, there were 55 of them. That means - fewer injuries, less pain and less suffering.We reduced number of traffic accidents by 49% by reduc-ing significantly the average speed during ride and we also introduced driving style monitoring among our employees, because key negative factors in accidents are - inappropriate speed and aggressive driving style. Average speed of a vehicle has been reduced from 91 to 80 km/h thanks to hosted pro-gram of strict monitoring of vehicles and providing feedback to drivers. We introduced monitoring of driving style by meas-

Only organization that learns may advance

Ulrich Peball, Director of HSE Function

uring sudden acceleration or sudden braking. This contrib-uted to reduction of fuel consumption, reduction of vehicle maintenance costs, but also to reduced number of traffic accidents and injuries, as well as of their consequences.

Another success is the increased number of observations. Our colleagues reported almost 18,000 observations and potential events. This enabled us to implement over 13,000 measures for improving conditions. As a result, we may see that number of events with medium or heavy consequences was reduced if compared to 2014.

Big progress was also made in inclusion of top management of NIS in HSE activities. They performed management walk-arounds at locations; they were actively involved in event investigations, participated in HSE committees and organized HSE days in their blocks.

What kind of progress was made in the last years in raising awareness of the employees about risks they are exposed to in their everyday work and is work discipline in HSE on the high level now? What is the situation at field and to what extent HSE measures are observed?

Raising awareness of the employees about risks is not an easy task. Especially in time when we have large number of newly employed who need intensive training, not only in observing legal regulations, but also in practical aspects of occupational safety. Line managers have a difficult task to raise work discipline to a higher level. They themselves should possess the awareness of a need to promote HSE culture and transfer this message to their workers. Good example of how to include more colleagues was the train-

ing course on raising awareness about risks in Exploration and Production, as well as the training on load lifting in Services Block.

What is the biggest HSE challenge facing us in 2016?

Our challenge is to remain focused on the implementa-tion of the HSE Plan for 2016, through seven reactive in-dicators: we will continue to reduce the LTIF (Lost time injury frequency) from 3 down to 2; we will reduce the number of fires in the industry by strict application of our programs, as well as further reduce the number of traffic accidents by stringent monitoring of the driving speed and by compelling all NIS drivers to comply with the rules of defensive driving. Other than that, we will track the results of air polluting emissions measuring of emitters and develop programs with a view to comply with the new EU legislation on emissions. In this pro-

For me, the most important result in 2015 was the reduced number of

incidents by 50 % - in 2014 there were 110 injured colleagues of ours, and in

2015, there were 55 of them. That means - fewer injuries, less pain and suffering.Nenad Stanojevski

Ulrich Peball, Director of HSE Function, speaks for Energize magazine about results

achieved in this area, challenges we will face in the forthcoming period and about

what expect us in 2016 - the Year of HSE in our Company.

cess we will seek to reduce the number of accident spills into the soil.

Our further actions will include the reduction of waste disposal costs by implementing framework agreements for the entire NIS and to this end we will conduct more emer-gency and crisis response drills across all blocks, in order to better prepare for reaction in case of major accidents.

In order to achieve all this, we will continue the manage-ment walk—around program. More managers from all Functions will take part in it by performing at least one walk-around per month. All our employees will actively be involved by reporting at least one hazardous incident or a near miss during one quarter. The expected 40,000 reports will enable us to envisage numerous measures directed towards safer work and living environment and also to continue to reduce number of injuries, traffic ac-cidents, environment pollution and loss of property.

DOSSIER 19

Fuel for cleaner planet

Expanded sales of compressed natural gas within NIS petrol stations network is of pivotal importance for our company operation. In 2014, NIS commenced to extract

CNG and distribute it from the Palić oil and gas field. Last year, the first retail filling point was put on stream in Novi Sad, while this year the sales of this type of fuel will commence in yet another petrol station in Čačak. Late August shall see the launch of the operation in

the CNG plant at the Ostrovo gas deposit field , with an approximate annual volume of around

7,7 thousand tons.

Compressed natural gas (CNG)

Compressed natural gas, due to its environmental properties, has been declared the fuel of future. Its main ingredient, methane, compared to other petroleum products, has the lowest COЅ emission per unit of released energy, so it is not an environment pollutant. CNG is a natural gas being compressed to the pressure within the range of 220 -250 bar. It is commonly known under the name of methane and has multiple uses: as heating fuel in the household, as well as in industry, with the increased use as the motor fuel for internal combustion engines.

PRODUCTION, SALES AND PLANS OF NIS In 2014, NIS commenced to extract compressed natural gas and distribute it. The first production plant became

operational at the Palić oil and gas field for wholesale, predominantly intended for industry, with the approximate annual volume of three thousand tons. Last year, the first retail CNG filling point intended for passenger cars was put on stream at the petrol station "Novi Sad 10". This year, NIS announces the start of sales of this type of fuel at yet another of its petrol stations in the town of Čačak. NIS operates around 400 petrol stations and has been the first in our country to announce the creation of a large-scale retail network of stations featuring compressed natural gas filling point. Other than that, late August shall see the launch of the operation in the CNG plant at the Ostrovo gas deposit field , with an approximate annual vol-ume of around 7.7 thousand tons. Kirill Kravchenko, the CEO of NIS, points out that the expanded sales of compressed natural gas within the company petrol stations network is of pivotal importance for our operation. - NIS seeks to rank the first, become a

Ružica Vranjković

DOSSIER18

DOSSIER20 DOSSIER 21

leader in producing this type of energy source, and next year we plan to deliver similar projects in the region at large - Kravchenko elaborates.

Within its business policy based on sustainable development and environmental management, introduction of modern technologies and energy efficiency boost, NIS has been con-stantly streamlining the quality of its products and services. The CNG fuel is one the pivotal realms of the company’s future operation. This type of fuel has long become a house-hold brand in Serbia’s market, so in recent years NIS has been promoting it at every energy expo and event as an alternative to all standard conventional fuels: petrol, diesel, LPG.

CNG ADVANTAGES AND CONSUMERS’ EXPERIENCEThroughout March, the Company has showcased CNG at the International Days of Energy and Investment in Novi Sad, as well as at the Belgrade Car Show, with principal

conclusion that in addition to the significantly improved octane number, which is always a measure of a fuel’s quality, the principal advantage of this energy source is the result of its energy, i.e. calorific value, which is far greater than in other motor fuels. Natural gas-powered ve-hicles also possess better steering features and their engine service life is longer. This type of fuel is also considered to be the most economical commercial fuel. Depending on ve-hicle type the savings might reach as much as 50 per cent.

NIS keeps abreast of all global innovations in energy tech-nology, the fuel of the future being one of them. In addi-tion to its main environmental advantage, it is also impor-tant that the compressed natural gas provides economic benefits to consumers. Igor Korać, deputy director of NIS Energy, points out that the compressed natural gas may serve as an alternative fuel for vehicles and machinery of any type, being the energy source of high implementation scope in industry. The "Iveco" company might be quoted as a good example of its use in the production. Speaking of experience in

the use of that fuel, Ivan Blažek, a product manager in "Iveco", stresses the economic gains it earns to the company. – This particular energy source possesses the highest calo-rific value of all fuels in the market, both in terms of its economical consumption and concerning envi-ronment protection, emissions of noxious gases and noise pollution - points out Ivan Blažek.

The greatest revenues generated by CNG sales are evident in the retail, being used in town traffic. The increasing number of Serbia’s towns develops plans to use it in their town traffic. The town traffic in Belgrade and in Novi Sad al-ready features a dozen of city buses and a few minibuses, fuelled by compressed natural gas. By 2018,

the capital city administration in the town traffic will significantly increase the number of vehicles that would be powered by this clean energy source. The most recent data concerning CNG sales in Serbia demonstrate that this high quality fuel, which NIS produces, has been increasingly used specifically in the car producing in-dustry. "Fiat-Chrysler Serbia" already produces CNG Fiat 500L. Its com-mercial director Umberto Iannuc-celli claims that these vehicles emit almost no noxious gases, and driving them is significantly cheaper. Tests of these vehicles have demonstrated that, for instance, a 100 kilometres ride by CNG-powered "Fiat Panda" requires up to three times less money than in case of diesel-powered one.

Installation of the device and CNG refuelling advantagesA device for methane fuelling is similar to the one for LPG. Depending on the vehicle type the installation of a CNG device costs between 700 and 1.500 euros, but due to a low price and fuel characteristics the investment is soon returned.

CNG environmental advantages compared to other types of fuel:

38-45 OCTANE

91-100 OCTANE

110 OCTANE

120-130 OCTANE reduced emissions of carbon dioxide

reduced emissions of reactive hydrocarbons

reduced emissions of carbon monoxide

BETER PERFORMANCE - natural gas-powered vehicles possess better agility and steering performance, even in extremely adverse weather, as the gas is already in the gaseous state

LOWER DRIVING COSTS - compared to driving powered by petrol, diesel or liquefied petroleum gas financial saving may reach up to 50 per cent

GREATER SAFETY - CNG is not toxic, non-corrosive, and its flash point is very high - 580 °C, it is lighter than air

THE ENVIRONMENTALLY FRIENDLIEST MOTOR FUEL - its product of combustion is water vapour

CNG

DIESEL

PETROL

LPG

30%

60%

90%

Fuel type - Octane number

STRATEGIES OF EU AND GLOBAL MARKETS The number of compressed natural gas-powered vehicles has been signifi-cantly rising in the European Union year after year. There were a million cars powered by that fuel two years ago. They are now reckoned to have grown almost two fold – around two million. This means that out of the total number of vehicles in European Union member countries almost one per cent is fuelled by CNG. Simultane-ously, as the number of vehicles in the European countries grows, the number of petrol stations that offer CNG is also

DOSSIER22 DOSSIER 23

on the rise. They are most numer-ous in Italy, Germany, Austria, Sweden, Switzerland and the Neth-erlands. In our neighbourhood it is Bulgaria, Serbia being the country with the fastest growing production and sales chain in this region. As regards the prices, the fact is that at this juncture the compressed natural gas is one of the cheap-est motor fuels. The average prices range between 0.8 and 0.9 euros per kilogram. This type of fuel is the most expensive one in Sweden and Norway, and the cheapest in Molda-via, Macedonia, Bulgaria, Romania and Serbia.

A Plan adopted by the European Union stipulates for all its member countries to have CNG refuelling stations before 2020, with 150 kilo-metres maximum distance between

EUROPEAN COUNTRIES

PETROL STATIONS

PRICE

Italy 1046 0,99 €/kg

Germany 921 1,11 €/kg

Sweden 154 1,74 €/kg

Switzerland 136 1,70 €/kg

Netherlands 130 1,09 €/kg

them. EU has allocated approxi-mately 160 million euros for their construction. CNG consumption has been on the rise also in Russia: there, more than 100 thousand vehicles are powered by it with almost 300 filling points catering to their needs.

There are almost four million such vehicles in China and Iran. Recent years have seen the highest growth of CNG consumption in USA and Canada, which is a direct impact of the increased extraction of gas out of oil shales. An average price is around two dollars for a gallon. The past decades have seen an annual 15 per cent global increase in the num-ber of natural gas-powered vehicles. Modern world is reckoned to have reached 22.5 million compressed natural gas-powered vehicles.

CNG MARKET EXPANSION – IS IT POSSIBLE?Experts consider that a broader CNG consumption has to be supported by the state by primarily launching posi-tive campaigns promoting clean fuels. In the quest to reduce air pollution from town traffic Europe’s metropo-lises, such as Paris, Berlin, Vienna or Copenhagen, have gone an extra mile and have been implementing various initiatives and urban projects, which provide subsidies facilitating town traffic agencies to outfit their buses to consume CNG. In our neighbour-hood, the government of Croatia back in 2013 offered subsidies for CNG-powered vehicles, providing free

Source: CNG Europe

NEIGHBORING COUNTRIES

PETROL STATIONS

PRICE

Bulgaria 105 0,80 €/kg

Serbia 13 0,71 €/kg

Croatia 2 1,16 €/kg

Macedonia 2 0,71 €/kg

Romania 1 0,74 €/kg

Source: CNG Europe

conversion devices, which was quite an incentive. According to the most recent data, for example, the com-pressed natural gas-powered buses in the city of Bologna account for 95 per cent of the town traffic. Spain, Austria, Scandinavia and Russia are poised to boost the compressed natural gas consumption in their town traffic.

CNG market in Serbia is underdevel-oped due to the small number of filling points, inexistent competition; how-ever, there is a potential, the advantage of existing NIS petrol network offers a good infrastructure that might be con-ducive to its expansion. This, however, would depend on the state policies and consumers interest. Our country is reckoned to have almost two thousand compressed natural gas-powered ve-hicles. VAT accrued from CNG is 10 per cent, with no excise duties.

INDUSTRY&BUSINESS 24 INDUSTRY&BUSINESS 25

Igor Jovanović

Companies throughout the world resorted to numerous measures in order to mitigate the effects of the drop in crude oil prices which, for a relatively short period of time, suffered a decline - from the amount of more than $100 a barrel in the summer of 2014 to the lowest price in

the last 13 years of less than $30/barrel at the beginning of 2016.

Oil industry business operations in the crisis years

THE YEARS OF LARGE CUTS

The dramatic fall in oil prices compared to 2014, resulted in numerous adverse effects in business operations of oil companies worldwide, which the entire sector has been facing in the current year as well. The ultimate scope of this downturn and its impact on the global world economy still remains to be seen in its entirety. Nevertheless, what is cer-tain is that operations of many oil companies in the period wherein oil, only in 2015, lost approximately 50% of its value compared to the previous year, can be defined in terms such as losses, layoffs, reduction of expenditures for investments and ‘’cutting’’ of dividends.

Under such circumstances in the global market, NIS’ busi-ness results in 2015 are all the more to be appreciated. Unlike companies operating with losses in the previous year or even went bankrupt, NIS maintained profitability and as regards new investments in the development, the company allocated twice the amount of the annual net profit. Also, in 2015, as the third consecutive year, NIS paid dividends to shareholders totalling 7.6 billion dinars, which is 25 percent of the net profit of the company in 2014.

The drop in crude oil prices did not cause problems solely to oil companies. Some countries which are big exporters of oil are also facing challenges and according to the avail-

INDUSTRY&BUSINESS 26 INDUSTRY&BUSINESS 27

the effects of the drop in crude oil pric-es which, for a relatively short period of time on the market, went from the value of more than $100 a barrel in the summer of 2014 to the lowest price in the last 13 years of less than $30/bar-rel at the beginning of 2016. In order to soften such a strong blow, companies in the oil sector reduced investments, laid off surplus employees, introduced rationalisation in business opera-tions, reduced dividends but all these measures only partially alleviated the heavy losses.

The British Petroleum (BP) thus in 2015 recorded a loss amount-ing to 6.5 billion of US dollars and announced a new layoff of 7000 employees by the end of 2017 be-cause it was estimated that the oil prices would not return to the old level quickly. For comparison, the same company ended the year 2014 with net profit of about $3.7 billion. The Royal Dutch Shell recorded a drop in profit totalling 53 percent compared with 2014, which is this company’s biggest profit drop in the

last 13 years and which resulted in the elimination of 10000 job posi-tions. Because of the oil prices drop, the Norwegian Statoil also recorded negative business performance suf-fering a net loss in the amount of $4.4 billion in 2015 while in the same period the Italian ENI recorded a loss amounting to as much as 8.8 billion of Euros. The fall in oil prices affect-ed the American ExxonMobil which completed the previous year with the halved profit in comparison to 2014. French "Total" had only slightly less losses (18 percent compared to 2014), but as regards the region of South-east Europe, Croatian INA had a drop in profits by as much as 83 percent.

ALARMING REDUCTION IN INVESTMENTSAlmost all companies announced that among cost-cutting measures imposed on them due to the fall in oil

prices, they will have to implement the restriction on new investments, a deci-sion that particularly worried experts. Some analysts said that the absence of new investments could inflict a heavy blow to the oil and gas sector, as this would entail a delay in exploration and production, and consequently in the deliveries of crude oil even in the case that the price of this energy-generating product should eventually return to the level before the precipitous decline.

According to the International Energy

Agency, big oil companies in 2015 dropped

46 major projects

able data, Venezuela, Nigeria and the countries of the Persian Gulf are most affected. Due to the adverse situation in the oil sector, even the gross domes-tic product (GDP) of Norway dropped by 1.2 percent in the last quarter of 2015. In Venezuela the drop in oil prices jeopardised the state’s ability to repay debts, while the inflation in this country, according to the January forecasts of the International Monetary Fund, will even exceed the level of 700 percent. As regards the states of the Persian Gulf, analysts expect their public debt to dou-ble and their fiscal assets to drop by one third by 2020. For the sake of compari-son, six member states of the Gulf Coop-eration Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United

The largest companies announced the reduction of expenditures for new investments in 2016 as

well, so that the decline in investments is expected

to be recorded for a second consecutive year

OIL COMPANIES’ LOSSESWith regard to the losses of companies in the oil and gas sector, the British Financial Times has estimated that the market value of shares of 300 largest companies in the world in this field has plummeted by as much as 39 percent since the summer of 2014. The same newspaper assessed that in the same period investors suffered losses of at least $150 billion on bonds of companies in the oil and gas industry.Almost simultaneously the indebted-ness of companies in the oil and gas sector was growing and the small, inde-pendent American companies, whose operations are primarily based on shale oil extraction, were getting indebted at a fastest pace. However, a significant indebtedness increase was recorded by certain large state-owned compa-nies, such as the Mexican Pemex, the Brazilian Petrobras and China National Petroleum Corporation (CNPC).

Companies worldwide resorted to nu-merous measures in order to mitigate

Arab Emirates) in 2012 together had an aggregate budget surplus of $220 billion while in the previous year they recorded budget deficits amounting to approxi-mately $160 billion due to the drop in oil prices. The sale of ‘’black gold’’ in these countries used to bring approximately 80 percent of the budget revenues before the dramatic decline in oil prices. This crisis began to reflect on the companies outside the oil industry in the Gulf, hence the Qatari television network Al Jazeera announced the layoff of about 500 employees or more than 10 percent of the total number of employees, with an explanation that such a decision was inevitable due to the financial pressure on the country triggered by low oil and natural gas prices.

INDUSTRY&BUSINESS 28 INDUSTRY&BUSINESS 29

According to the data of Graves & Co, in 2015, in the world's oil and gas sector

258.000 employees lost their jobs

Kirill Kravchenko, NIS CEO

“ We are aware that business conditions in 2016 will be much more complex than in the previous year primarily because of the low prices of crude oil on the world market and currency fluctuations. We are facing hard times due to which we have to stay focused and

put a lot of effort to remain profitable. ”

According to the data of the International Energy Agency, big oil companies cancelled 46 major projects in 2015. Ac-cording to the same source, investments in oil and gas fields were reduced last year by 20 percent compared to 2014, which is the largest reduction ever. The largest companies have announced reduction in expenditures for new invest-ments in 2016 as well, so that the decline in investments is expected to be recorded for a second consecutive year too.The French "Total", for instance, has announced that with

JOB CUTSPressured by the crisis, oil compa-nies worldwide were forced to resort to downsizing. According to the data provided by Graves&Co, in 2015, 258000 employees were laid off in the global oil and gas sector. After pessimistic predic-tions regarding the movement of oil and gas prices in 2016, some companies announced that they will further reduce the number of employees, particularly because they do not plan to open new exploration fields.

More specifically, in January 2016, BP announced the layoff of another 4000 workers in the areas of exploration and production, out of a total of about 24000 employees in that block. According to data from international agencies, these are just additional job cuts in the British company which in 2015 already laid off about 4000 people, and thus the number of employees worldwide was reduced to about 80000. "We have to be sure that our company is competi-tive and sustainable. External market conditions are worsening, "said David Nicholas, a company spokesman.

At the same time, Royal Dutch Shell which is considered one of the biggest rivals of BP in Europe, had to lay off about 7500 employees in 2015. This company announced at the begin-ning of the year that it would have to eliminate another 2800 jobs if negative tendencies should persist in the global oil market.

In addition to companies engaged in exploration, production, processing and sale of oil and gas, other compa-nies linked to the sector also experi-

Crude oil lost almost half its value on the market in 2015, and the drop in prices caused major

problems in the operations of companies in the oil sector

the increased reduction in operating costs, investments in the coming period will be about by two billion Euros less than it was originally planned. The Croatian INA Group, which, with a fall in profits and lower sales, still managed to end 2015 with a profit of 7.56 million Euros, announced that it will implement further cost-cutting measures, carry out the sale of assets of the company, and that it will combine the reduction of capital and operating costs, doing all this in order to maintain the business operations profitability.

The Norwegians either could not avoid the reduction of new investments in oil exploration and production. In November 2015, the Norwegian oil companies announced that in 2016 they intend to invest 171 billion kroner, but the plan was revised due to the crisis, and new investments were reduced to 163.9 billion kroner.

In this way, the Norwegian oil sector reduced the total in-vestments by 13 percent in the current year compared with the investments that were made last year, and the Nor-wegian authorities are most concerned about the planned smaller investments in petroleum exploration. In this area of the Norwegian oil business, companies plan to invest 16 billion NOK, which means the investments would decrease by 44 percent compared to 2015. Norwegian economic experts stated that they expect that a certain fall would be inevitable, but had no idea and could not predict that it would be at such a large scale, and expressed expectations that the Norges Bank (the Central Bank of Norway) would now have to respond by further lowering of interest rates.

enced problems in business operations. Losses and layoffs could not be avoid-ed even in Schlumberger, the world's largest oil service company. Only in the last quarter of 2015, the company eliminated 10000 job positions and the data are even more devastating taking into account the period from Novem-ber 2014 because since then, 34000 workers have been laid off.

The American service company Hal-liburton announced new layoffs on the grounds that the cuts "are necessary

INDUSTRY&BUSINESS 30 INDUSTRY&BUSINESS 31

Despite the fact that the price of oil was halved in 2015 as well, NIS managed to maintain profitability of business operations and the year ended with a profit of

14,6 billion dinars

in order to overcome the problems in a challenging mar-ket environment." The company had already laid off 22000 workers last year, so the number of employees was reduced to about 80000. However, Halliburton started 2016 with the announcement that due to additional savings it will have to eliminate another 5000 job positions.

NIS PROFITABLE IN 2015 AS WELLDespite the very difficult and challenging conditions prevailing in the global market, in 2015 as well, NIS managed to maintain profitability in business operations and to end that year, despite the constant decrease in the prices of crude oil, with a net profit of 14.6 billion dinars. In addition, it is particularly important that NIS did not waive its planned investments in the previous year, so that more than 30.3 billion dinars were invested in the development of the company, or twice as much as the annual net profit. In this way, NIS kept its position among the top big-gest investors in Serbia.

The NIS’ realized profit, which is half the amount of the profit in 2014, was affected not only by continuous decrease in oil prices but by some significant exchange losses as well, which in 2015 amounted to 8.1 billion dinars. The EBITDA indicator amounted to 46.5 billion dinars. It should, thereby, be kept in mind that the financial indicators of the company are lower than in 2014, but they are significantly higher than planned for 2015, taking into account the decline in the price of crude oil. Maintaining profit-ability under extremely complex business conditions was largely

contributed by the continuous implementation of operational efficiency programs, and the achieved economic effect of meas-ures for increasing the efficiency of business operations in 2015 (both on EBITDA and cash flow) amounted to 13.3 billion dinars."The past year was difficult not only for NIS, but for the entire oil and gas sector in the world and I am proud that we managed to maintain profitability. Our response to the crisis included teamwork, cost reduction and operational efficiency in all busi-ness segments, which yielded the expected results and thus they remain our main focus. Also, NIS employees, through their own innovation, contributed to the increased efficiency of the program called "I have an idea," said Kirill Kravchenko, NIS CEO.

In conditions of the crisis in the oil and gas sector, severely shaking not only companies in this industry, but also countries that rely on this segment of economy, NIS paid the amount of 151.9 billion dinars into the state budget for tax liabilities and other public revenues in 2015, which is by 12 percent more than a year ago. Also, in the areas of exploration and production the company increased the hydrocarbon reserves by 8 percent compared with 2014. The oil refinery throughput and the volume processing of semi-finished products have increased by 6 percent compared to the same period last year and NIS also continued with the modernization of processing capacities, pri-marily through the activities within the project called "Bottom of the Barrel".

In the field of energy, whose further development is one of the NIS’s strategic projects, a company was established with the aim to construct a combined heat and power generation plant –cogeneration plant of the capacity of 140MW in Pancevo, while the construction of smaller power plants Velebit 3 and Sirakovo 2 was completed. Thus NIS now has a total of 13 small power

plants on its oil and gas fields in Serbia, with a total capacity of 11.6 MW. Also, NIS started the retail of compressed natural gas being the first large network of petroleum stations that included in its offer this energy-generating product, which, due to its characteristics is be-lieved to be the fuel of the future. The success was also recorded in sales, where the total turnover of petro-leum products increased by 5 percent compared to 2014. The company also increased its share in the retail market of petroleum products in Serbia by 1 percent. NIS simultaneously continued with the modernization of the retail network and the introduction of new products and services to customers, such as 100-octane gasoline G-Drive 100. Despite numerous challenges, in 2015 as well, NIS continued to invest in the occu-pational health and safety of its employ-ees, as well as in various environmental projects. Only for these purposes, the company allocated 627 million dinars last year, which enabled the implemen-tation of projects aimed at reducing emissions of pollutants, waste minimiza-tion, as well as the land rehabilitation. The company has continued to care for its employees, being aware that they are its most valuable resource. Despite all the difficulties it faced in the past, NIS allocated 223 million dinars last year for professional development of its employ-ees, through the organization of various types of training sessions. In addition, NIS perceives investments in young peo-ple in Serbia as investing in the future, and therefore, through its corporate program the "Energy of Knowledge", it has continued to support talented high-school and university students. Also, NIS is a socially-responsible company and in the previous year it continued to deepen cooperation with the local communi-

ties in which it operates, as well as with prominent individuals and institutions, and within the program of corporate social responsibility and various spon-sorships it has invested more than 401 million dinars.

BUSINESS PROSPECTSAnalysts generally agree that the recov-ery of oil prices, as well as of the industry in the entire sector, is going to be a slow process, accompanied by many chal-lenges, including various political effects, a large supply of oil in the market and a slowdown of the world economy. Further

struggle to preserve the company's profit-ability was announced in NIS as well. "We are aware that business conditions in 2016 will be much more complex than in the previous year, primarily due to the low prices of crude oil on the world mar-ket and currency fluctuations. We are facing hard times because of which we have to stay focused to the end and put a lot of effort to maintain profitability", said Kirill Kravchenko, the CEO of NIS. Kravchenko said that NIS’s measures to combat the crisis in the oil sector, in ad-dition to further insistence on efficiency, in the next three years, would include the focusing of business operations on investments, primarily in the bottom-of-the-barrel technology.

33INDUSTRY AND BUSINESS

PRODUCTION PROCESSES – PUSH BUTTON TO ACTIVATE

Production Unmanned

Introduction of state-of-the-art automated equipment is a long stride

towards optimising NIS refining process and stepping up its reliability. By the same token, production wells

automation makes the production process management efficient and

effective, boosts the accuracy of measurement of the extracted oil and

gas, reduces production costs and diminishes chances for theft, along with

environmental safety strengthening.

Refinery processing has undergone a tremendous change over the past six years in terms of technical and technologi-cal processes. There is no more a split between the refinery’s revamped segment with its MHC&DHT complex and the old part of the compound. These differences are eliminated first of all due to the significant investments into the moderni-sation of the complete refinery processing. In laypeople’s terms, the overall refinery operation has increasingly been functioning at the push of a button. All business units of this part of NIS have been incorporated into the automation: starting with crude oil refining within a string of primary and secondary plants, including handling of semi-products and products, reliable production and distribution of energy, and finally coming to steady and safe dispatch of oil products in local and foreign market.

STREAMLINED PROCESS MANAGEMENT-Indeed, the automation process of the refinery processing is irreversible. The level of investment shall go up and down, which makes sense, taking into account the Company overall financial performance, however it is beyond all doubt that aproximately six years ago the Refinery did away with obso-lete management systems and in recent years set up a full-blown computer-based management process thus greatly facilitating the production process management. This is sure-ly a breakthrough in strengthening reliability and operation optimisation in refining - claims Dragan Gačanović, director of Automation Sector of Refining Technical Department. Any investment undertaking, regardless of the scope, now effectively represents a breakthrough in the modernisation of the process. This will be the same in the course of the coming turnaround (August-September 2016), which envisages the re-placement of lockout systems in series S-2400 compressors, as well as in series S-2100 and S-2200. Other than that, numer-ous investment maintenance projects will be completed with a view to eliminate the problems detected in functioning of instrumentation (replacement of regulating valves that went out of order frequently, replacement of inadequately selected measuring instruments with instruments with appropri-ate functioning). Takođe će se instalirati new metering and regulating equipment will also be put in place as part of the package of approved MOC projects.-Significant operations were completed during the previous turnaround, when two more than 1.6 million euros worth automation projects were delivered - says Gačanović. It was

Vojo Krkobabić, Nenad Stanojevski

INDUSTRY AND BUSINESS32

INDUSTRY&BUSINESS 34 INDUSTRY&BUSINESS 35

the replacement of the obsolete management system con-trolling the number of turbine revolutions and regulation of functioning of three compressors, as well as the instalation of systems for stationary measurement of vibrations in rotating equipment u Pančevo Refinery. These activities have been completed at the largest of the refinery plant for gasoline and gases productionju (FCC) and in the Alkylation plant.

RELIABLE AND SAFE OPERATION These investments brought about a steadiness to the produc-tion process and boosted the overall operative effectiveness. The previous, unreliable system for controlling the number of revolutions and compressor crash protection, which in recent years kept suspending the production process, has been replaced with a state-of-the-art control system both in terms of hardware and software. The new system has been designed pursuant to requirements of standards for safety systems SRPS IEC 61511, is outfitted with three times more instru-

“ The Refinery has beyond all doubt done away with obsolete management systems and in recent years set up a

full-blown computer-based management process thus greatly facilitating the

production process management. ”

ments, thus significantly strengthening operational safety at the level of processors and modules, along with numeri-ous improvements at the level of applicative software and interface for operators and machines. Maximum control and compressor crash protection was implemented here, which ensures failure detection in air flowing inside the compressor. State-of-the-art technical solutions in this system provide a possibility to make corrections to regulation parameters, which practically avert any failure.

FCC Unit as well as Alkylation Plant are outfitted with the system for monitoring and diagnostics of rotating machines, which will also provide greater safety, availability and reliabil-ity of operation of the pivotal machines and devices. Within a short time as required by this projecta, 422 sensors, 50 junc-tion boxes, more than 1000 meters of cable tray, 1700 kilo-grams of various carriers and more than 11 thousand meters of multi-core cables were put in place. More than thousand square metres of scaffolding have been errected and subse-quently dismantled in order to complete these operations.

Other than that there was a completion of the APC project -Advanced Process Control for series S-300, S-2100, S-2200,

S-2300, S-2500, S-2600. This mode of control makes operators’ performance easier, while ensuring a better qual-ity of products, i.e significant finan-cial effects are achieved. APC allows operators to control the process by way of setting desired properties of the products, contrary to the phased out control modes, which controlled temperature, pressure, flow rate... APC package implementation is also planned for the new MHC&DHT facili-

ties and at Hydrogen plant.

-The automated balancing of all refin-ery streams project is in its final stage. This will ensure the instant obtain-ing of data concerning stock, energy sources consumption and production streams, and these data will enable singling out of areas to be improved – explains Gačanović.

AUTOMATIC FIRE WARNING DEVICES AND GAS DETECTORSThe Pančevo Refinery fire warning and explosive and toxic gases detec-tion systems, predominantly aimed at early warning of personnel of certain accident situation with a view to boost the Refinery’s industrial safety, was upgraded with state-of-the-art solu-tions in this field in the recent four years. Predrag Basta, head of analysers and ITFG section (Industrial Telecom-munication, Fire Warning and Gas Detection) says that in 2012, in addi-tion to the revamping of MHC&DHT

Units, integrated fire warning and gas detection system was installed in the process plants and handling, which made possible the communication of data by way of alawps and visu-alisation as to the exact location and gravity of accidents provoked by fire or gas leak and provided prompt response by operators of these plants and fire fighting brigade in the Refinery. – This project included the implementation of around 450 fire and gas sensors, 15 central units for smoke detectors and increased gas concentration, 40 distribution cabinets in the plants, software package Winguard to control and visualise the systems of smoke detectors and increased gas concentra-tion and more than 100 kilometres of optical and copper cables, which cost in total in excess of 2.2 million euros. Following this we also revamped these systems in other units of the Refinery, first of all in the jetty, vehicle tanking facility, compressor stations at FCC Unit, and last year also in the slop pro-cessing and gasoline blending plants,

which were allocated an additional 1.5 million euros – says Basta. Implementation of these systems cre-ated conditions for integration with process plants lockout systems and complete automation of the process in the event of accidents without, or with minimum human interference in deci-sion making and response. This year is dedicated to keeping the high level of reliability and availability of these systems along with further upgrades and expansions of the system, which will be realised by tapping into the investment programme along with the projects previously approved.

PRODUCTION UNMANNED OIL AND GASIn 2010, Exploration and Production Block commenced the SCADA project,

Dragan Gačanović, director of Automation Sector of

Refining Technical Department

INDUSTRY&BUSINESS 36 INDUSTRY&BUSINESS 37

HSE and Energy EfficiencyOther than its involvement in managing and completion of capital projects, the Industrial Automation and Metrology Department has also displayed its great commitment to energy efficiency. With this in mind 15 solar systems for power supply have been put into operation at production wells in the non-mechanised method of exploitation, which have no electricity power supply. This Department has also dem-ostrated its keeping abreast of global trends in the industrial automation by installing on gas wells wireless pressure trans-miters manufactured by a renown producer. The Industrial Automation and Metrology Department has also made its contribution in relation to HSE by putting into operation three systems for leak detection at oil pipelines: OS Kp - US Tisa, US Tisa – JP “Transnafta“ and US Adorjan – Novi Sad Refinery (OS – dispatch station, US – uploading station). At two wells in the oilfield “Turija North” was put into operation system for detection of theft of well fences.

(the abbreviation practically means automation of production wells), when the NIS Investment Committee prelim-inarily approved 10 million euros in-tended for all seven envisaged Project stages. All seven stages of the project have so far been delivered successfully accomplishing significant effects. In the recent year and a half alone, when our magazine first reported on this project, the Industrial Automation and Metrology Department in charge of production automation processes has made great efforts to use capital pro-jects to make the production process ever more efficient and effective. The following data are testament to that: we have 100 per cent of telemetry of the mechanised fund and 98 per cent of the non-mechanised fund of the production wells, and we achieved the automation of all technological ves-sels exceeding 100m³ by level meters, interphase and temperature. Moreover, we upgraded all mass flowmeters for dispatch and reception of fluids flow by computers (which automatically cal-culate the production in real time), so

tions across the board. Other than that, we now have an overview of leak detection u svim oil pipelines linked to the Refining Block. Any develop-ment at any portion of the oil pipeline is immediately spotted. Engineers in charge of production monitoring are capable of seing if the dispatch is go-ing smoothly or not, which oil pipeline section is damaged and it is immedi-ately reported and addressed. This is a state-of-the-art oil pipeline monitoring system – Stašuk claims.

SYSTEM INTEGRATIONIn addition to the mentioned results, we implemented the software for reporting to Gazprom Neft in OIS USOI (automated system for collecting and checking data from the produc-tion process, as well as reporting to Gazprom Neft) and integraction with

OIS+system (system containing all geological data concern-ing a well), so that well technical modes are being replicated into the SCADA system (system for telemetry of the produc-tion process in production wells) and thus ensuring moni-toring, i.e. comparison of production wells with the techni-cal mode. This integration brings about a full monitoring of oil and gas production at all levels.All measurement systems installed over the course of the com-pletion of the SCADA project up to now, have been linked to a single system of dispatch centres – SCADA system. This provides a distribution of process data to higher levels, which in turn, en-sures better insight into the production process, and along with it a better control. The SCADA application has undergone struc-tural changes, so the implementation of certain KPIs (key perfor-mance indicators), incorporation of technological schemes and implementation of a great number of reports resulted in a more efficient monitoring of the production process.– Efficiency increase is best described by a diminished re-sponse period. We used to pretty long await reports on the developments from the well, because it required a worker to reach the well in order to check the status. By contrast, we now immediately receive data on a remote control prin-ciple of the causes of the disrupted operation of a pump. This diminished losses provoked by idling wells, as it is spotted much faster – Guteša elaborates.– Integrated system is so efficient that by just “clicking” on a

that they now represent modern sys-tems for mass measurement shipped, or received amounts of fluid.34 AMU (automatic measurement units) have been operation, which ensures the measuring of 50 per cent of the production wells fund by mass method (method that measures the mass of the produced fluid). Instal-lation and commissioning has been under way of another five units at the Kv/Kg oilfield.In the words of Ivona Guteša, an AMR engineer in this Department, the AMU unit ensures the best quality measur-ing of crude oil, gas and water with minimum deviations. – Operation of AMU unit is of an exceptional impor-tance for the Exploration and Produc-tion Block, which is why for three consecutive years we have been pro-viding courses in theory and practical training to prepare oprerators involved in the production of oil and gas to op-erate these units – Guteša pointed out.The head of Industrial automation and metrology section Aleksandar Stašuk claims that the automation and me-trology system brings the greatest ben-efit to the monitoring of the mechani-cal production system, which is prone to failures and damaging of deep-well pumps that go out of order, or pressure drop, as well as the increased accuracy of measurement of the produced and dispatched fluid. – Engineers now have the opportunity to see almost 100 per cent of data generated at the production wells. We receive data on the consump-tion of electricity and gas, dispatch of oil, fluids, tank fawp measurements, pressure, temperature etc. Automated operation system reduces response period and accelerates data supply from wells, while ensuring top level occupational safety as this system incorporates oil processing opera-

“ Automated operation system reduces response

period and accelerates data supply from wells, while ensuring top level occupational safety as

this system incorporates oil processing operations

across the board. ”Aleksandar Stašuk, head of Industrial automation and

metrology section

The automation and metrology system brings

the greatest benefit to the monitoring of the

mechanical production system , which is prone

to failures and damaging of deep-well pumps or

pressure drop, as well as the increased accuracy of measurement of the

produced and dispatched fluid

well you get all data: if and how it operates, its production rate, is a piece of equipment put into the well, are there any geological and technical operations under way in it, and when exactly – all this is displayed. Moreover, you can find out which wells, for instance, underwent a workover in the recent three months – says Stašuk.New softwares have currently been introduced – “Techni-cal Modes”, “Hiding Chart”and “Dispather’s AWP” (auto-matedo work place) – seeking to step up the pace of work with geological data base, digitalise CITS and the entire production monitoring process.A new SCADA application is planned to be implemented in 2016. It will be possible to access it from anywhere and at any t ime and thus the production data will be avail-able from mobile devices at any platform.As in 2015 there was a launch of the OIS USOI system of reporting to Gazprom Neft, it is planned for 2016 to inte-grate SCADA data base with USOI base. Thus USOI reports would be automatically filled out in the domain related to the measurement of reserves in tanks, the volume of injected formation water and gas quantity.Seeking better results in future, we also plan to create a colaboration portal, which will ensure better, faster and simpler monitoring of activities of all contractors by CAPEX and OPEX. This will create a transparent environment that will display contractors’ KPIs.

INDUSTRY&BUSINESS 38 INDUSTRY&BUSINESS 39

With energy efficiency, NIS has joined the club of the best

Energy Management

Successful resolving of all challenges related to energy ef-ficiency calls for serious and systemic approach at the level of the entire state. In highly developed industrial countries, this issue attracts a lot of attention, all the more so since, based on analyses of the International Energy Agency, the world demand for energy will increase by 2035 by 30% when compared with the present level of consumption. Definite trend in energy domain in this period is also the reduced consumption of fossil fuels in favor of energy generating products coming from renewable energy sources. Higher energy consumption in the coming years and swing towards energy generation from renewable sources make the princi-ple around which all energy strategies are based, as well as measures for energy cost optimization.Data on energy efficiency in Serbia, unfortunately, have not had stabile and positive trends yet. Serbia is, in energy efficiency, at the very bottom of the European continent. Based on available statistical information in Serbia, one can neither determine fully reliable level of energy consump-tion by industries, nor can define clear energy indicators. This is, before all, a consequence of lacking system of energy management, although it has been anticipated by positive regulations on efficient energy administering.

Development policy and upgrading of all the Company business segments, especially refining, where energy is

consumed the most, but also where best results in energy efficiency increase may be achieved, is headed for the

application of the best global practices in this domain.

Vojo Krkobabić

INDUSTRY&BUSINESS 40 INDUSTRY&BUSINESS 41

APPLICATION OF THE BEST GLOBAL PRACTICES

Fortunately, what has been happening in the past seven years in NIS, actually from arrival of GazpromNeft as the major shareholder, has been the radical swerve

in the energy efficiency. The Company’s development policy and moderniza-tion of all business segments of NIS, especially of refining, where energy is consumed the most, but also where best results in energy efficiency increase may be achieved, is headed for application of the best global practices in this domain.Strategic investment orientation of NIS, when talking about Refining Block, are directed towards implementation of the Bottom-of-the-barrel project, with technology of deferred coking, where maximum production increase of white

petroleum products (98 %) leads to the highest level of optimization of all costs, including energy costs before all.

Joint project of NIS and Gazprom Ener-goholding and implementation of joint construction of steam-gas thermoelec-tric power and heating plant in Pancevo, of over 140 megawatts of capacity should be observed in the same light. This ca-pacity will provide reliable supply of the Refinery with heating energy at accept-able price, and with the least possible adverse environmental impact. In ad-dition to this, the thermoelectric power and heating plant in Pancevo will have sufficient capacity to place substantial quantities of energy to the market.

In addition to strategic investment projects of NIS that are bringing the largest benefit when optimization of energy costs is at issue, cogeneration power plants with gas turbine have been successfully built in the NIS’s Energy Block for three years already. The first cogeneration plant was built in Sirakovo in 2013, and then twelve more cogenera-tions were built, and they together give the total installed power of over 11.5 megawatts. During 2016, another new mini power plant of installed power of 2.5 megawatts will be built.

With the rational attitude towards energy and optimal utilization of natural resources, we should also mention, by all means, some projects in the sphere of gas monetization, i.e. construction of the first plant for compressed natural gas of annual capacity of about three thousand tons. This was immediately followed by construction of first filling stations for supply of cars and delivery vehicles in Novi Sad and Cacak, of annual capacity of 1.7 thousand tons. Sales facility in Novi Sad has already been in operation and another sales facility is about to open in Cacak. Similarly, late August will witness the startup of CNG facility on the gas field Ostrovo, of capacity of 20 tons per day.

When projects of renewable energy sources and use of wind, biomass and solar energy are in question, NIS is in com-munication with competent national bodies and it is ready to welcome EU directives and global trends in increasing percentage of energy generated from renewable sources. It is well known that goal of the European Union is to cover with renewable energy 20 percent of gross final energy consump-tion by the year 2020.

NIS’s investment in Plandiste wind park in Southern Banat is at the beginning of its implementation, and installed power of this wind park would be 102 megawatts, while calcula-tions show that annual production of electricity from wind power would be 241 gigawatt hours (GWh).

In NIS Refinery in Pancevo, a unit for biodiesel production is in its preparatory stage, more precisely, a plant where bio-com-ponent received from renewable sources would be blended with the best-quality diesel of Euro 5 quality in appropriate percentage and in compliance with EU requirements.

BIGGEST SAVINGS IN REFININGBiggest potential for saving in energy consumption at NIS is certainly in refinery processing, which is comprehensi-ble, because major portion of energy is consumed during the process of refining. Savings achieved during 2015 at the company level were close to 518 million Serbian dinars, out of which, savings achieved in Refining Block were more than 240 million Serbian dinars, and that makes about 46 percent of total saving. Strategy of NIS for energy efficiency in Refin-ing Block is permanent improving of the system for energy consumption, tracking and providing necessary information at all levels in order to render support to energy systems operational management and to decision making regarding energy administration, as well as reducing the costs related to energy, increase of the company competitiveness, profit growth and reduction of energy losses during distribution of

Refining block introduced also illustrations of current compliance with normative on consumption of energy generating products

by units and their deviation from the planned values. These data are available to direct performers in production via digital control system, which opens prospects for

everyone to contribute to energy saving

INDUSTRY&BUSINESS 42 INDUSTRY&BUSINESS 43

energy generating products. The aim is to see NIS Refinery reaching and exceeding the level of energy efficiency index achieved by refineries in the region. “With results that we accom-plished in 2015, we are on the margin between energy efficiency levels (quar-tile) 3 and 4”, Ivan Kuznetsov, Director of Energy Sector in Technical Depart-ment of Refining Block was quoted as saying. Our target by the year 2018 is to achieve the level two, that is, 105 en-ergy efficiency units. This indicator is a complex one and it encompasses the entire consumption of energy generat-ing products, depth of oil refining and the level of total utilization of plants in refineries. During this year, we are spe-cially committed to implementation of organizational-technical measures, which do not require large financial investments, and we expect effects that are one million euro worth. There is room for this ambitious plan, be-cause daily energy consumption on the Refinery level, meaning consumption of steam, natural gas and electricity, annually, represents equivalent of 700 thousand tons of heavy fuel oil.

„In two years, we will be very close to other refineries in the neighborhood, which have average energy efficiency

index of about 100, while the implementation of the Bottom-of-

the-barrel project with deferred coker technology, will prepare conditions to lower this index even more and to join

the club of the best ones.“

Energy efficiency, shown by the Energy Intensity Index, represents proportion between real energy consumption and the consumption set by regulating standards, and it shows how efficient each technological unit and refinery as a whole are in their operation, if compared to standard indicators. This also enables assessment of harmoniza-tion level between specific refinery's technology and its impartial compari-son with the best world refineries.Along with a comment that it is dif-ficult to get energy efficiency infor-mation and comparisons among oil companies in this domain, Milorad Buric, Director of Energy Management Sector within Energy Block of NIS says that, according to available data from oil and gas production, the Energy Performance Indicator (EnPI), or energy consumption per unit of product (GJ/t) in the Shell company was, for example, reduced in 2014 by 2.2 percent when compared with the previous year, while NIS had the increase of 9.1 percent in the same period. However, during 2015, NIS achieved extremely favora-ble results in comparison with 2014, and reduced the Energy Performance

Indicator by 7.9 percent.

In the sphere of crude oil refining, the Solomon indicator (energy intensity index) was reduced in Shell by 0.7 per-cent during 2014, whilst NIS had 11.3 percent of reduction in the same period. In the past year, additional reduction of energy intensity index by additional 3.2 percent followed in NIS’s refinery.

Energy efficiency trend from 2013 has shown, practically since startup of MHC&DHT complex, that NIS’s Refining Block has made a huge step forward in this area. Energy efficiency index was 142 and since then, it has dropped to 122 through the year 2015.

ENERGY MANAGEMENT STANDARDIZA-TION

Besides, the standard ISO 50001: Energy Management System was intro-duced in 2013. In the period following introduction of this standard, Refining Block was subjected to three checks whereby it was found that refining of NIS, but also other certified processes in this part of the Company, did not have any incompliance with this standard. Only praise for the achieved results and for all the operational measures taken to increase energy efficiency came from the external ap-praisal company that had performed verification of this standard. Simply put, it has been confirmed that energy is being used in rational manner in NIS, and that there has been continual work on promoting energy manage-ment and raising awareness about it. Special emphasis is on systematic, sus-tainable and consistent development of energy management system, as well as on commitment of management and all the staff to this goal.

Certainly, there is still room for im-provement and therefore, implementa-tion of different activities is underway in order to make Refinery better than competitors in the neighborhood. Based on relevant indicators showing as to where Refining Block is positioned if compared with the best refineries in the area, it is clear what has to be done to continue good performance in this area. - Within two years, we will be very close to other refineries in the neigh-

borhood, which have average energy efficiency index of about 100, while the implementation of the Bottom-of-the-barrel project with deferred coker technology, will prepare conditions to lower this index even further and to join the company of the best ones – Kuznetsov underlined. Potential for saving is present in all units. One can always do better, but the largest space for improvement is related to the major consumers, and those are, before all, those plants within primary oil refining - atmospheric and vacuum distil-lation units, which will be upgraded. Experts in this part of refinery have already started work on possibilities for using heat energy that is being released in the production process and on reduction of consumption on that basis. Apart from this, operational-organizational changes and numerous small investments have significant impact on ever better results and savings in energy consumption. All together, these facts influenced the change in awareness and increased motivation of the employees to deliver maximum at their workplaces and to use energy with diligence.

TRACKING ENERGY CONSUMPTIONA lot was achieved in the previous year to raise awareness of the employees regarding importance of reducing own consumption in Pancevo Refinery. Posters have been made showing topics related to rational consumption of energy, both in technological process and in work facilities. Refining block introduced also depictions of current compliance with normative on consumption of energy generating products by units and their deviation from the planned values. These data are available to direct performers in production via digital control system. This has opened a possibility for all to contribute to energy savings.

Furthermore, the project for labeling leakage of different fluids on parts of equipment using recognizable cards is aimed to enable quick identification of energy losses and repair of defects, thus reducing irrecoverable energy losses.Morning briefings have been enhanced by introduction of the visualization of operational data depicting energy gen-erating product consumption, which show consumption of energy generating products in the period from midnight to 7 a.m. and estimated consumption for the following 24 hours. These pieces of information give midline of consumption and possible aberration from the set values in consump-tion. The aim is, of course, to react immediately and reduce energy consumption within the planned framework at spots where it is higher.With all this, Pancevo Refinery carries out activities with the aim to improve reliability and efficiency in operation of technological kilns, and implementation of the pilot project of shift competition on the vacuum distillation unit is un-derway, to the end of reducing own consumption.

Energy savings achieved at the company level

during 2015 amounted to almost

518 million

dinars

Ivan Kuznetsov, Director of Energy Sector in Technical

Department of Refining Block.

44 45EU MARKETEU MARKET

SECURITY OF SUPPLY

What does the revised security of gas supply package bring along?

EU started focusing its energy policy on the security of supply. It launched its EU energy security strategy in 2014 and energy security was nominatedas one of the five main policy areas of the Energy Union announced in February 2015.

NIS Liaison Office with EUThe EU imports 53% of all the energy it consumes which is a daily cost of around €1 billion. In addition, energy imports account for 20% of total EU imports. When it comes to various types of imported fuels, the EU imports 90% of its crude oil, 66% of its natural gas, 42% of its coal and other solid fuels and 40% of its uranium and other nuclear fuels. From these figures one can easily understand the extent

to which EU is vulnerable to possible disruptions in energy import and external shocks. With this in mind and having experienced the 2006 and 2009 gas crises, EU started focus-ing its energy policy on the security of supply. It launched its EU energy security strategy in 2014 and energy security was nominated as one of the five main policy areas of the Energy Union announced in February 2015.

46 47EU MARKET EU MARKET

The ‘Energy Security Package’ is comprised of four main documents:

1. A proposal for the amendment of the Regulation on Security of Gas Supply seeking to improve the EU's resilience to supply disruptions

2. A proposal for the amendment Intergovernmental Agreement (IGA) Decision which will increase transpar-ency and ensures that IGAs in the energy field comply with applicable EU legislation and policies

3. Strategy for Liquefied Natural Gas (LNG) and gas stor-age which aims at ensuring that the EU can fully benefit from the diversification potential provided by Liquefied Natural Gas, the establishment of new and liquid gas trading hubs, and enhancement of the effectiveness of cross-border storage

4. Strategy for heating and cooling that aims at increas-ing energy savings in the heating and cooling sectors through higher energy efficiency and empowering consumers to adapt their demand

Here we are focusing on the two legislative initiatives while the Strategy of the Liquefied Natural Gas and gas storage will be covered in our next article.

The package focuses on gas as the fuel that has the dominant role in the EU energy mix but also stresses its role in facilitating the EU to reach its climate goals - reducing emissions by replacing coal and balancing re-newables (Commissioner Arias Cañete: gas is the “bridge from coal to renewables”)

protected customers in order to supply the protected customers in a neigh-boring Member State. The solidarity principle also foresees the inclusion of the countries of the Energy Commu-nity to which the Republic of Serbia is a party to, under the condition of full implementation of the security of sup-ply regulation.

When it comes to the proposed revi-sion of the Decision on Intergovern-mental agreements in the field of energy, it basically aims to prevent situations similar to those the EU encountered with the South stream project where a number of Member States signed an Intergovernmen-tal Agreement which was deemed incompliant with the EU Internal Energy Market rules ex-post. The

The ‘Energy Security Package’ aims to build the missing in-frastructure links in a relatively well-developed internal gas market and ensure that solidarity mechanisms are in place between Member States by introducing the principles of: Transparency – Security of Gas Supply regulation aims to increase the role of the Commission by introduction of “automatic” notification of the Commission of the ex-ante conclusion or proposed amendments of ‘Security of supply relevant contracts’, which are defined as “contracts with a long-term duration (i.e. exceeding one year) that provide individually or cumulatively with other contracts with the same third country supplier or its affiliates more than 40% of yearly natural gas consumption in the Member State con-cerned to one natural gas undertaking or to its affiliates.Regional approach- the proposed amendments to the Secu-rity of Gas Supply regulation foresee a change in perspec-tive - from national to regional. New rules require Members States to work together on the development of the regional “Preventive Action Plans” and “Emergency Plans” that would be drafted on the basis of the previously identified risks of the gas disruption for the given region. These plans would be overseen by the Commission ex ante.

Solidarity for consumers – the third component of the proposed amendments is aimed to ensure the solidarity between interconnected Member States. Again, the Com-mission takes upon itself the oversight of national measures to avoid over/under protection of domestic consumers that would negatively affect more vulnerable Member States in cases of supply interruption. The suggested mechanism would enable interruption of supplies to domestic non-

The solidarity principle also foresees the inclusion of the countries of the Energy Community to which the Republic of Serbia is a party

to, under the condition of full implementation of the security of supply regulation

mechanism of prevention here is again the ex-ante compliance check of the Intergovernmental agreement (or proposals for its amendment) in question by the Commission.

The Energy Security Package is now for-warded to the European Parliament and Council of the EU for consideration. The new rules are expected to come into force after the package is approved by both concerned EU institutions, which is an-ticipated to happen during the Slovakian presidency of the Council in the second half of 2016. What should be expected during the debates on the proposed amendments to the Regulation on Secu-rity of Gas supply is that on issues related to transparency and increased powers of the Commission to request additional information (such as the one on whether

prices should be communicated or not) those countries that have in the past repeatedly complained about gas pricing practices like Poland will be supportive of including details on prices. Others, like Germany, might not be so receptive to this idea, as they could see it as a way in the direction of losing the advantage of lower prices they negotiated individually. Also, it is certain that the solidarity principle is going to stir up some heated debates, if nothing else, due to the possibility of cus-tomers from one Member State benefiting from investments made in another.

When it comes to the proposed revision of the Decision on Intergovernmental agreements, it is certain that the Com-mission proposal on ex-ante assess-ment is going to be met by the opposi-tion from a number of Member State.

NIS & EU48 NIS & EU 49

Gas Field in the spotlight of the global expert community

NIS project aimed at mitigation of uncontrolled leakage of CO2 in

geologicalstorages, which is funded by EU, attracts attention of international

experts

The final year of EU MiReCOL Project implementation According to our current knowledge, the experience of NIS in the control of unwanted migration of CO2 in the gas field Becej is unique worldwide and therefore precious not only for the results of the EU MiReCOL project, but also for the European and worldwide expert community. A static model of Becej field made by STC experts for the MiReCOL project was presented at the Conference demonstrating that the applied remedial measures in 2007 were successful. The experience in CO2 leak-age remediation in Bečej gas field, successfully handled by NIS, was presented together with another two papers on the current results of the MiReCOL project to the most expert audience with regard to carbon capture and storage (CCS) in Europe.

PROFESSIONAL RECOGNITION OF STC EXPERTISEThe topic of CO2 capturing, transport and storage is of great continous interest in the European scientific community as is confirmed by an ever-growing number of calls for propos-als within the programs and funds of the European Union for the funding of projects for proposing and developing new sophisticated and advanced technologies to deal with the ever growing CO2 emission concern. Therefore, the fact that the research paper of our colleagues from STC was selected for the participation in the leading European conference on this topic confirms the positive contribution and quality of the work of the specialists from our Company on this project, which will lead to a good standing of NIS and STC on the European map of companies participating in the creation of new knowledge in one of the most important research fields, and it will also have an effect on the transfer of knowledge and technologies and on raising the professional level of employees in NIS and STC NIS-Naftagas. The MiReCOL project is financed through the grant provided by the European Union within the FP7 program (the Seventh Framework Programme) as the main instrument for the implementation of the EU scientific research policy 2007-2013. The project leader in NIS is the Energy Block, and the project is implemented in close cooperation with STC NIS-Naftagas,Naftni Servisi and the Exploration and Production Block, with everyday support from the Function for External Affairs and Government Relations which ensures the participa-tion of our Company in EU projects.

“ A difficult experience in the CO2 deposit in Becej and a decade-long gas leakage successful approach brought

NIS among the globally renowned operators successfully dealing with

CO2. CO2 leakage remediation in 2007 is the unique case in the world, and most importantly, it was performed

successfully. ”

The EU project MiReCOL (Mitigation and remediation of CO2 leakage) entered in early March the third and final year of its realization. As part of a wider European consortium consist-ing of Old World most reputable research institutions from the Netherlands, Great Britain, France, Norway and Germany and renowned oil and gas companies (Shell, Statoil, Weath-erford – PRORES AS), the colleagues from NIS and Scientific and Technological Centre (STC) participate in the project from the very beginning, and, in accordance with the pro-gram of project activities, the project team will soon also be joined by the colleagues from Naftagas - Naftni Servisi.

Igor Korac, Deputy Director of Energy Block

INTERNATIONAL EXCHANGE OF EXPERIENCE

Over the first two years of project implementation the col-leagues from STC had the opportunity to exchange experienc-es with numerous European researchers in the field of stopping the migration of uncontrolled CO2 leakage in geologicalstor-ages. One such opportunity was the conference in Trondheim, Norway on capture, transport and storage of CO2 (The 8th Trondheim Conference on CO2 Capture, Transport and Stor-age), where NIS unique experience in stopping the uncontrolled CO2 migration in the gas field Becej was presented to the European expert audience. A joint scientific research of our colleagues from STC and the colleagues from a Netherlands Organisation for applied scientific research – TNO (EU funded MiReCOL project leader) was presented at the Conference on the topic "The first field example of remediation of unwanted migration from a natural CO2 reservoir: the Bečej field, Serbia". After the presentation, this paper was published in the Febru-ary issue of the European energy magazine Energy Procedia.

Vesna Živković Milivojević

NIS & EU50 NIS & EU 51

NIS Company has recently received the official notifi-cation from the European Commission that the project of European consortium, which has been submitted for participation within the EU program: Horizon 2020, with NIS partnership participation in the area of HSE (aimed to increase industrial safety) has been approved for funding through the European union’s grants.Pursuant to the official Evaluation Report of the Europe-an Commission, project proposal of the Consortium with partnership participation of NIS got the highest evaluation score within all evaluation categories and thus won this extremely competitive call for proposals, with participati-on of consortiums from the EU Member States and other

and new indicators for increasing level of industrial safety in Pancevo. Activities regarding case study of NIS will be initiated during 2017, and they will last approximately one year. Par-tnership participation of our company in the Project, in the capacity of one of the Project end users and the leader of the Pancevo Case Study is aimed to upgrade the resilience of Pancevo Oil Refinery system, to respond to new external challenges by applicati-on and validation of new indicators, methodology and tools, thus contribu-ting not only to improvement of HSE culture in NIS, and industrial safety, reduction of operational costs of NIS through possibility of integrating the solutions developed during the Project into existing processes, but also to strengthening industrial safety in Pancevo through cooperation with pu-blic authorities and industrial plants in the vicinity of Pancevo Refinery. Preparation of the Project, in coope-ration with other NIS partners within

Refinery might have to industrial zone and the city of Pancevo itself. Objectives of this Project, as well as scheduled activities of NIS within the Project, that will be implemented in the period 2016-2019, have been harmonized with the strategic HSE goals of the Company, aiming to reach increased industrial safety, HSE risk and crisis management, prevention and additional reduction of accidents, preventive security care and the like.In addition, implementation of the Project will contribute to another element of NIS’s HSE system, which pertains to inclusion of all relevant actors in implementation of new, joint HSE Vision of NIS. That is, the Project anticipates that NIS, as the leader of the Case Study, will also take in a petrochemical plant (public enterprise HIP Petrohemija) , a nitrogen fertilizer factory (public enterprise HIP Azota-ra), and also local public authorities in Pancevo within the Project, in order to assess and implement new solutions

Industrial Safety and Crisis Management

Planned NIS’s activities within this Project will enrich the Company’s

strategic HSE perspective in the view of increased industrial safety, HSE risk and crisis management, prevention and

additional reduction of accidents.

EU Project for NIS New HSE Vision

states that are participants of the EU program Horizon 2020, with total of 28 submitted project proposals, which makes NIS’s success even more significant. Total of 20 partners from 11 countries (nine countries of the EU, Serbia (NIS) and Israel) are participating in the Pro-ject consortium, leader of which is the German institute: European Virtual Institute for Integrated Risk Management – EU-VRi. Partners of NIS within the Consortium are renow-ned research-scientific organizations, universities, consul-ting companies, small and medium enterprises and seven end users (Hungarian Ministry of Interior, City of London etc.) Three-year long cooperation will give exceptional possibility to exchange best HSE practices with internatio-nal partners, which, at the same time, represents one of the goals in further improvement of HSE culture in NIS.The Project anticipates implementation of a comprehen-sive analysis of resilience degree of eight infrastructural facilities across Europe, the ones that are of strategic importance, so-called: Facilities of critical infrastructure – grid of healthcare institutions in Austria, water-supply system in Sweden, airport in Budapest, energy infrastru-cture of the city of Helsinki, NIS’s refinery in Pancevo, etc. Resilience of critical infrastructural facilities to respond to new threats will be measured through several possible scenarios (terrorist attack, natural disaster, technological factor, human error, etc.). Partners of NIS in the Project will test different scenarios, consequences and effects (inclu-ding cascade effects) that potential accident in our Pancevo

the Consortium was carried out in the period January-August 2015, when the Project was submitted for participa-tion under the Horizon 2020 call for proposals. Upon positive evaluation of the Project, official negotiations with the European Commission are continuing regarding allocation of of the European Union grant for the Project implemen-tation, which will result in signing of the Grant Agreement for implemen-tation of this three-your project of industrial safety. Total value of the Project amounts to around five million euro and 100 percent of the Project will be funded by the European Union. Be-ginning of the Project implementation is planned for May 2016. HSE Function is the leader of the Project within NIS, and the Project will be implemented in close cooperation with NIS Refining Block, and with comprehensive and everyday support of the Function for External Affairs and Government Rela-tions, which ensures the participation of our company in EU projects.According to Dimitry Bezrukov, Process Safety Manager in NIS, direct benefit that NIS will reap from this Project will be evaluation, done by prominent international experts, of a degree of the existing safety barriers that are being applied with the aim of preven-ting chemical accident on the site of NIS's Pancevo Oil Refinery, as well as provision of modern methodology for assessing reliability of the existing in-dustrial safety system, present within our company.

Additionally, the equally important benefit of partnership participation of our company in implementation of this years-long Project, represents also a possibility to exchange experience and knowledge in the areas of HSE and industrial safety, with renowned organi-zations from Europe, that experts from our company will have, Bezrukov said.

Nenad Stanojevski

INDUSTRY&BUSINESS 52 INDUSTRY&BUSINESS 53

Mineral fuels quality monitoring

Within the scope of continuous

cooperation with state authorities the National Petroleum Committee

of Serbia – World Petroleum Council (NPCS-WPC), with NIS as one of the members, realizes a project for the

improvement of mineral fuels quality monitoring efficiency in Serbia.

What to do about the mineral fuels grey market

The implementation of the project " Capacity Building for Improved Mineral Fuels Monitoring System – Transfer of Best Practices against Grey Economy - FUELPAGE" started in February 2016. The Project foresees exchange of expe-rience and transfer of know-how and best practices from the European Un-ion and the Czech Republic aiming at strengthening the mineral fuels moni-toring system, and it is co-financed by the Central European Initiative (CEI) Fund at the EBRD.

As part of joint efforts against grey economy and illegal mineral fuels trade, this project was conceived at the initiative of NPCS-WPC and NIS as a member of NPCS-WPC in cooperation with the Trade Inspection of the Min-istry of Trade, Tourism and Telecom-munications, Ministry of Mining and Energy and the Faculty of Mechanical Engineering at the Belgrade Univer-sity. The transfer of the European and Czech best practices in this field will be performed by the renowned Czech Uni-versity of Chemistry and Technology in Prague, and the Czech Association of Petroleum Industry and Trade. The FUELPAGE project will be imple-mented in the next 7-8 months through a comprehensive analysis of national regulations on the mineral fuels moni-toring system with a particular focus on the early experiences in the implemen-tation of the Regulation on mineral fuels and biofuel quality monitoring, which sets forth the conditions, method and procedure of mineral fuels quality moni-toring, and the implementation of which started on 1 December 2015. The imple-mentation of this Regulation represents the harmonization of the national leg-islation with the relevant EU directives and European standards, in accordance with the obligations accepted through

the Stabilization and Association Agree-ment as well as via Serbia’s membership in the Energy Community.

According to Evgeny Metelev, Director of NIS Department for Department for International Affairs and Foreign Government Relations, the full sup-port of the company to the realization of the FUELPAGE project, in the first place through the participation of the members of NPCS-WPC (directly including the representatives of NIS) in the project realization and the main project working body led by the Trade Inspection of the Ministry of Trade, Tourism and Telecommunications, represents a significant contribution to the continuous cooperation between NIS and NPCS-WPC with relevant state authorities in the field of improvement of mineral fuels monitoring system ef-ficiency in Serbia. - In addition to tangible benefits for our company as well as for other members of NPCS-WPC from this project, the first and foremost goal of the project is the transfer of experience and good prac-tices from the European Union to the relevant Serbian state institutions. The importance of the realization of com-mon projects and dialogue among the state authorities, legislative bodies and

key economic and other entities par-ticipating actively in the mineral fuels market in Serbia has been recognized and supported by the Central European Initiative (CEI), which approved the re-alization and co-financing of the project - said Metelev.

FUELPAGE is the second NPCS-WPC project the realization and co-financing of which, with the support of NIS’s GR Function, was approved by the Central European Initiative. This program is one of the instruments for the exchange of experience aiming at an equal econom-ic and social progress and improvement of the capacities of the members of this regional organization with 18 member countries from Central, Eastern and South-Eastern Europe.

NPCS-WPC, with an active contribu-tion of our company, successfully realized the BIOGOS project in 2014 and 2015, which was declared a suc-cess story by the Central European Initiative because of its contribu-tion to the realization of Directive 2009/28/EC related to renewable energy sources in the transport sec-tor in Serbia and in the preparation of draft national regulations in the biofuels sector.

Evgeny Metelev, Director of NIS Department for

Department for International Affairs and Foreign Government Relations

“ In addition to tangible benefits for our company as well as for other members of NPCS-WPC from this project, the first and foremost goal of the project is the transfer of experience and good practices from the European Union to the relevant Serbian state

institutions. ”

Nenad Stanojevski

ENVIRONMENT54 ENVIRONMENT 55

GENERALCONCLUSIONS AND COMMITTEMENTS

EU Energy and Climate Policy post COP21

NIS Liaison Office with EU

“There should be no energy company in the world, which believes that climate policies will not affect their business“, Fatih Birol, the first man of the In-ternational Energy Agency (IEA), has recently stated. Experts of this body that represents the interests of the largest oil-consuming countries, have translated this assertion into specific figures: Reach-ing the key climate objective – keeping global warming at the level below two degrees – would require fossil fuels to fall from some 85 to 60 per cent of the global energy mix as soon as by 2040. Spencer Dale, the chief economist of BP,

The Paris Agreement aims to keep the global warming at the maximum limit of two degrees Celsius above pre-industrial levels, with the aim to possibly make an

additional reduction to 1.5 degrees and pledges to halt the increase of CO2 emissions globally „as soon as possible“.

from the Climate Agreement reached in Paris? Ten of the world’s biggest oil com-panies, or majors, mainly from Europe, have thus surprised the expert public with their decision from mid-October last year, in the run-up to the Paris summit (COP21), to come forward with a public declaration in which they offer support to objectives set forth by the U.N. to curb global warming. Two months later, COP21 adopted the so called Paris Agreement, which the Morgan Stanley analysts will be quick to brand as a “long-term challenge and threat” for the business models of oil and gas companies. In this light, the initia-

the company which developed models of “consumption destruction” scenarios based on climate objectives agreed in Paris, estimated that the world had almost three times the reserves of oil, gas and coal that it could burn if it were to hit the “two-degree” goal. If so, this begs a question why on earth is the oil and gas industry spending in excess of $150 bil-lion each year looking for new reserves? Does this realm of the economy with the wealthiest, which means the most power-ful, most influential global companies, have a response, defence or an alterna-tive in the face of challenges emerging

ENVIRONMENT56 ENVIRONMENT 57

tive, that in October was signed by, among others, the heads of European giants such as BP, Royal Dutch Shell, Total, Statoil and Eni, as well as Saudi Aramco and Mexico’s Pemex looks strange and requires explanation. All the more so as the British Petroleum (now BP), Shell Oil, Texaco (now part of Chevron) and Exxon were all members of the same coalition that started an advertising campaign in the 1990s opposing Washington’s involvement in strong international efforts like the Kyoto Protocol initiative to reduce greenhouse gas emissions. The conspicuous absence of the U.S. giants, Exxon and Chevron from this declaration makes abundantly clear that this realm of U.S. economy, which enjoys a strong Republican backing in Congress, shall remain true to that strategy.

THE PARIS AGREEMENT Before we try to explain the logic of which the signatories of the Declaration were guided by, let us briefly mention the key ob-jectives of the Paris Agreement, which, as the Morgan Stanley, as well as other analysts, particularly emphasize - leave in the bowels of the earth, not a small portion of the reserves of oil and gas that form part of the assets, balance sheet items, or the current market value of the world's leading oil and gas colossus.The agreement reached in Paris, among other issues, obliges 195 countries to submit their reports to a U.N. body every five years detailing the progress they made in slashing the carbon dioxide emissions. The Paris Agreement aims to keep the global warming at the maximum limit of two degrees Celsius above pre-industrial levels, with the aim to possibly make an addi-tional reduction to 1.5 degrees and pledges to halt the increase of CO2 emissions globally „as soon as possible“. The head of one of European coal-based energy companies, commented for the Financial Times: "To be honest, we're not too worried, because this does not change a lot of things for now." The phrase "for now", however, is precisely what makes all the difference, comments the Fortune magazine. Specifi-cally, the majority of the roughly 30,000 officials, businessmen, scientists and activists who participated in the two-week UN climate talks, have agreed that the Paris Agreement in its 31 pages, sets in motion a process, whereby countries will steadily reduce its CO2 emissions, possibly to levels dramatically lower than the existing ones. Should Morgan Stanley, even in the wake of the Paris conference, keep as "attractive" the rating of European oil majors for the next few years, arguing that the short-term cyclical factors override the effects of the climate

agreement, the investment bank finds that there is no doubt that the Paris Agreement creates long-term challenge to their business models.

CONSEQUENCES FOR THE BUSINESS MODELS OF OIL COMPANIES It is certain that the analytical service of all major companies that produce fossil fuels already assessed the consequences of Paris and how it would affect their long-term business mod-els. It is also clear that the declaration authors could not help but anticipate decisions when COP21 in October announced oil and gas Climate Initiative. Marketing the meaning of that declaration was to persuade all skeptical world public that companies are signatories with serious intentions to redirect more on cleaner energy sources. The fact is that it is increas-ingly difficult for companies to cope with environmentalists and provide the necessary environmental permits, wherever they occur and whatever the upstream or downstream project plan to implement. However, it is evident that the initiative does not contain any specific commitment of companies to support the fight against climate change, in addition to mentioning the

manner in which they say will contribute to reducing fuel consumption and emis-sions energy efficiency measures. Those included “cleaning up” their own opera-tions in upstream and refining realms, especially reducing methane emissions from their oil and gas installations. The companies also said they would work with automakers and consumers to im-prove vehicle fuel economy. Instead, the declaration-signatory oil companies, who account for 10 % of the world’s energy production, left it up to governments to establish regulations stipulating the direction for further action.

STRESSING THE IMPORTANCE OF NATURAL GAS What analysts were , however, able to notice in the subsequent statements by some of the signatories of the initiative, as well as to present as a possible "busi-ness logic" of this action is to emphasize the importance of natural gas as an en-vironmentally friendly fuel considerably more acceptable than coal. The picture becomes clearer if analysis of existing and planned capital investments signa-tories, mainly oriented to natural gas, starting with the spectacular announce-ment by Shell to offer 43 billion pounds for the acquisition of BG Group, a British firm with big gas reserves and one of the world’s biggest producers and suppliers of LNG. “You can argue that Big Oil is be-coming Big Gas,” says Occo Roelofsen of McKinsey, a consulting firm. Others are going in for renewables. Total of France has a majority stake in SunPower, one of the world’s biggest solar-power firms. Eldar Saetre, the boss of Statoil, Norway’s

state-run oil company, says that in 15 years there may be more opportunities outside oil and gas than within.

THE CO₂ TAX THREAT

American giants like Chevron and ExxonMobil have distanced themselves from the initiative launched by their European competitors, predominantly because the potential “remedies” — like carbon taxes or the trading of carbon-emission permits — would almost in-evitably raise the price of their fuels. In the middle of last year, Rex W. Tillerson, ExxonMobil’s chief executive, said that he would support putting a price on car-bon as long as it was “revenue neutral” for the world’s largest oil company. An explicit call for putting a high price on CO2 emissions is conspicuously omitted from the European oilmen declaration text. Claudio Descalzi, chief execu-tive of the Italian oil company Eni, has later explained that such a measure is inevitable, however its mentioning was deliberately avoided so as to try and drum up support for the Initiative from some more international companies. “Now we are trying to create a consen-sus,” he said. Reservedness of Ameri-can oilmen in this story illustrates the fact that Republicans’ come back to the White House would again bring political background against which ExxonMobil could finance organizations that are critical of actions such as the Kyoto Protocol and helped the formation of the Global Climate Coalition with a mis-sion to break the consensus of scientists that global warming is a consequence of burning fossil fuels.

Supporting climate objectives, for sure, should not be seen as an exit strategy from oil companies’ classical business

mode. Speaking of which, the declaration proponents, BP and Shell are among the most ambitious companies in the world in their targets for increasing their rate of extraction of oil and gas, Shell by 5

per cent a year, and BP by between

5,5 and 7 %

Repeating court trials of tobacco giants? Last November, the New York attorney general’s office opened an investiga-tion of Exxon Mobil on allegations that the U.S. oil giant has lied to the public about the risks posed by the climate change, as well as to its investors about the ways these risks might jeop-ardise the oil business. The New York Times, however, reports experts’ as-sumptions that it would be more diffi-cult to sentence oil companies, than in the cas of tobacco giants, who know-ingly concealed results of research on the consequences of smoking from its customers. This is because the scien-tists of oil companies, including those from Exxon Mobil, presented their findings on climate change publicly at conferences and took part in interna-tional research related to this field.

REGION 59

Summit "Balkans Partnership - Strengthening Regional Relations" held in Brussels

The CEO of NIS Kirill Kravchenko par-ticipated as a panelist at the Summit “Balkans Partnership - Strengthening Regional Relations” held on 16 February in Brussels, which was organized by the "Friends of Europe".

This event was dedicated to the migrant crisis which affects all of Europe, and the possibilities and proposals for its resolu-tion, which will be of great importance for the countries on the so-called Balkan migrant route. The Summit gathered high ranking officials from the EU and the region, and, the audience was ad-dressed, among others, by the Commis-sioner for European Neighbourhood Policy and Enlargement Negotiations Jo-

Although the business panel where he spoke had a pessimistic tone, the CEO of NIS, however, expressed

the position that NIS managed to prove though that investors can work

successfully in the Balkans which has many competitive

advantages in comparison with other regions

NIS has a representative office in Brus-sels which was opened in 2011 and operates under its EU Liaison Office in Belgrade. Standards and policy, directives and laws on the basis of which the EU creates a unified market and establishes the foundations of the European Energy Union, are spiritus movens of building and development of a business environment in which the Company will continue to strengthen its leadership position in the petroleum industry of Serbia and in the region. The Company supports the participation of the Serbian economy in the relevant debates in Brussels and promotes in the EU headquarters the culture and values of the countries where it operates.

hannes Han, ministers of governments of the countries in the region and the Chief Executive Officer of NIS Kirill Kravchen-ko. Engaged in lively discussion led by the moderator, panelists addressed other important questions for the region - the need to strengthen economic ties among the Balkan countries, growth of standard of living in the countries in this region and the common wish of all countries in the Western Balkans to join the European Union.

In the third panel on the topic "The ways to achieve the best business results in the Balkans", the participants were also addressed by Kirill Kravchenko who acquainted them in the introductory part of his speech with the volume of invest-ments of NIS so far in the business oper-ations in Serbia and the region, pointing out that it is of utmost importance for every company to operate in an environ-ment of certainty. Although the business panel where he spoke had a pessimistic tone, the CEO of NIS, however, expressed the position that NIS managed to prove though that investors can work suc-cessfully in the Balkans which has many competitive advantages in comparison with other regions, such as, for example, an attractive tax system in Serbia.

NIS has also recognized the importance of human resources for the company, which is why it has numerous programs of cooperation with universities and

schools in Serbia providing the incen-tive for the best graduates from uni-versities in Serbia to look for jobs and encouraging the students to return to Serbia from abroad.

The idea behind the Summit was that, at the moment when the Balkans and the European Union are facing internal and external challenges, the representatives of governments of Balkan countries and economy would send together a message that regional cooperation and the pros-pects of membership in the European Union are a basis for creating a favour-able strategic, legislative and investment climate in the Balkans.

COMPETITIVENESS IN THE BALKANS

The idea behind the Summit was that, at the moment when the Balkans and the European Union are facing internal and external challenges, the representatives

of governments of Balkan countries and economy would send together a

message that regional cooperation and the prospects of membership in the

European Union are a basis for creating a favourable strategic, legislative and

investment climate in the Balkans.

58 REGION

PROMOTIONS AND MARKETING60 PROMOTIONS AND MARKETING 61

ENERGY AND INVESTMENT DAYS

During the International Energy and Investment Days on 10 and 11 March in Novi Sad, the Company took part in the panel discussion Technologis of the Future in Power Generation and demonstrated the benefits of com-pressed natural gas (CNG) consump-tion. Environmental and economic advantages of CNG, as well as Com-pany accomplishments in production and sales of this power source were presented to experts and scientists by Nikola Luburić, expert coordinator in charge of sale and trade of natural gas in our company’s "Energy" division. In

With us in KopaonikIn late February at Kopaonik, Serbia’s fanciest sky resort, NIS introduced its “Riding Together” loyalty pro-gramme within its collaboration with the general importer of “Škoda” in Serbia, “Auto kuća Čačak”. All visitors of this household name sky resort, who were interested in that, had a chance to show off their skills in placing snow chains on tyres, putting roof box in place, as well as testing “Škoda” cars by cone driving, and the best ranking in each category were awarded commemorative gifts. This was also a chance for amateur driv-ers who enjoyed the winter sports to get acquainted with the benefits of using “Riding Together” card, as well as to find out how to apply for this new NIS loyalty programme.

Power generation industry and car makers traditionally showcase their achievments at early spring expos. This year, NIS demonstrated the latest trends in its operations at three expos. Moreover, in late February at Kopaonik, Serbia’s fanciest sky resort, the Com-pany introduced its “Riding Together” loyalty programme within its collabo-ration with the general importer of “Škoda” in Serbia, “Auto kuća Čačak”.

his presentation Luburić identified the energy or calorific value as CNG main advantage, which is far greater than in other motor fuels, as well as the Octane number which indicates the fuel quality. - Natural gas-powered vehicles pos-sess better startability and steering performance, along with longer engine service life. Compressed natural gas is deemed the most economical com-mercial fuel, as it might bring about as much as 50 per cent savings depending on the vehicle type – Luburić claimed.

Spring promotions of new programmes and products

NIS at car shows, energy and Russian economy expos in Serbia

Nenad Stanojevski, Vesna Živković Milivojević

Benefits of compressed natural gas, “Riding

Together” loyalty programme, promotion of a NISOTEC broad plethora of products are among the topics NIS representatives

showcased at expos.

PROMOTIONS AND MARKETING62 PROMOTIONS AND MARKETING 63

BG CAR SHOW 2016

At BG Car Show 2016 that started in Bel-grade just days after the previous expo, our Company presented the benefits of “Riding Together” loyalty programme. This was an opportunity for the show visitors to find out the details of the ben-efits NIS provides to consumers within its programme, which were elaborated by Predrag Jovanović, brand manager in charge of GAZPROM in Sales & Distribu-tion. "Riding Together" gives the consum-ers a chance to collect bonus points every time they purchase fuel, goods and services at NIS Petrol and GAZPROM refuelling stations, and subsequently use these collected bonus points to reduce their bills at the Company retail points. The "Riding Together" loyalty card us-ers may save as much as 3.5 per cent of their bills total. - Being a company, where consumers come first, NIS constantly improves its offer, with retail network devel-

SERBIA AND RUSSIA JOIN FORCES IN POWER GENERATION

NIS also took part in Expo Russia Ser-bia 2016, a Russia’s economy exhibition in Serbia, to introduce its key power generation projects. A round-table discussion entitled “The present-day Russia and Serbia cooperation in tradi-tional and alternative power genera-tion, power-saving technology” was attended by representatives of Ministry for Mining and Power Generation of Serbia’s Government, energy companis

from Serbia and Russia, University for oil and gas from Russia, as well as Russia Chamber of Commerce. NIS was presented by Ilya Kutyaev, a develop-ment director at Development Depart-ment in "Energy" division.He said that the establishment of the "Energy" Block in 2011 marked the start of NIS transformation from a strictly oil and gas company into a power generation holding. He explained that back then, a raft of projects com-menced, predominantly in cogenera-tion, which were followed by projects to develop geothermal energy. Kutyaev listed the current NIS energy projects, among them the construction of a CHPP in the town of Pančevo, its ca-pacity to reach 140 MW, and to be com-pleted in a concerted effort with the Centroenergoholding Company, a part of Gazpromenergoholding, as well as a Wind Farm in the town of Plandište, its

opment indicated as a priority of our company business. The testament to this is our new "Riding Together" loyalty programme, which, we believe, is going to become a reliable partner of our consumers at every kilometre – said on this occasion Alexei Chernikov, Sales & Distribution director.

This loyalty programme helps NIS to maintain a long-term and steady partnership with its consumers. The Company presented to the Car Show

capacity 100 MW.Russia’s economy exhibition in Serbia, Expo-Russia Serbia, has been a great success since 2014, being supported both by the government of the Russian Federation and Serbia. This undertak-ing seeks to strengthen trade liaisons, as well as streamline and improve economic cooperation of Russia and Serbia, and other SEE countries as well.

visitors a wide range of NISOTEC oils and lubricants for motor vehicles, and proposed a special offer for the them – a voucher, which the consum-ers could use to gain a 20 per cent discount on certain sales items in the assortment of NISOTEC products at any NIS Petrol and GAZPROM refuelling stations throughout Serbia. In addition to that our Company has showcased compressed natural gas as the most economical fuel at the compound of the Belgrade expo.

Novi Sad is one of Serbia’s three largest cities, and it is just one hour’s ride away from Belgrade. Located at the foot of the Fruška Gora, a small mountain in the Pannonian Plain, this city incepted along the River Danube, has been around for a bit more than 300 years. The first mentions of this city go back to 1694, two years after the commencement of the construction of the Petrovaradin Fortress, the city’s landmark. Under the name of Novi Sad, this city gained a status of “free royal city”, after its citizens paid 80.000 forints in a bail to Empress Maria Theresa on 1st February 1748.

Throughout the year, especially in the summer, this city is awash with various festivals dedicated to film, music, theatre… so the culture of this city is never dormant. One of Europe’s most prominent music festivals, EXIT, has been taking place at the Petrovaradin Fortress since 2001.

The easiest way to appreciate the beauty of the capital of Vojvodina is a light-pace walk, step by step, and be ready to accept all its various facets in a way this city combines and accepts them.Novi Sad houses the headquarters of the NIS Company.

REFINING66