Balkan energy companies explore regional, EU markets

04/04/2014

EU membership means entering a large, liberalised energy market, and regional companies need to prepare, experts say.

By Selena Petrovic and Ivana Jovanovic for Southeast European Times in Zagreb and Belgrade -- 04/04/14

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Croatia's INA has been expanding its oil exploration activities domestically and offshore. [INA]

Experts are urging oil and gas companies in the Balkans to start thinking on a regional level in order to succeed in the open European market, which entails bigger energy players and EU regulations.

Zeljko Tomsic, a professor at the Faculty for Electrical Engineering and Computing at Zagreb University, was in charge of the working group on the energy chapter during accession negotiations between Croatia and the EU. Tomsic said that developing local oil companies to perform at a regional level will increase their ability to compete on a larger scale.

"They have to expand first in their surroundings, where they are familiar with the market, people's habits and language. After they master their business operations regionally, in terms of organisation and expertise, they will be able to seek a wider market," Tomsic said.

Tomsic said that companies will be more likely to enter markets in the region by opening their own subsidiaries instead of buying the existing energy companies because of complex domestic conditions, including surplus workers or energy prices seen by the public as a social category.

"The arrival of foreign companies and increased competition definitely accelerates the need for the application of European standards. When consumers are given the opportunity to choose, they will prefer goods and services in conformity with the EU standards," he told SETimes.

Zagreb-based INA-Industrija nafte, dd (INA) is one of the oil companies that hopes to develop regionally. Plans for the expansion will include the Croatian government, which holds 44 percent of INA shares, and Hungarian oil company MOL, which owns 49.1 percent.

The company has been expanding its oil exploration activities domestically and offshore, while seeking a long-term sustainable energy strategy.

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Serbian oil company NIS said its main strategic goal is to become the most efficient, fastest growing energy company in the Balkan region by 2020. [Nada Bozic/SETimes]

Tomislav Cerovec, spokesman for the economy ministry, told SETimes that both sides have named their representatives to the team that will suggest a strategy to develop INA as a regional corporation.

"Further development of business activities in the region is mostly needed to preserve business activities and raise the level of companies' competitiveness. Open access for the EU companies to the Croatian market requires constant improvement of business operations in the domestic market and expansion to other markets," he said.

The Croatian Chamber of Economy told SETimes that future growth of oil companies' operations will be influenced by the decisions of the majority owners.

They cited the example of Gazprom Neft wanting to strengthen its ground in Southeastern Europe by 2020 through Serbian oil company Naftna Industrija Srbije (NIS).

NIS, whose majority owner is Russian Gazprom, said its "main strategic goal is to become the most efficient, fast growing energy company in the Balkan region by 2020, while maintaining its leading position on the Serbian market."

Tomislav Micovic, secretary-general of the Association of Oil Companies of Serbia, welcomed the adoption of EU laws in this area, but said that implementation is lacking.

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"There are laws and institutions; now mechanisms need to become operational. The work of the relevant institutions that should contribute to competition development is questionable as well, and something Serbia has to tackle," Micovic told SETimes.

In order to fulfill the EU requests, Serbia is about to start working to ensure mandatory oil reserves.

"With the aim to ensure safe supply, EU demands that each country at any given moment has oil reserves equal to the amount it consumes in 90 days. According to some predictions, this will cost Serbia 500 million euros, plus costs for accommodation capacities. Serbia plans to increase oil prices to collect this amount," Micovic said.

How will the expansion of oil companies help improve the economy in the Balkans? Add your thoughts in the space below.

This content was commissioned for SETimes.com.
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