Analysis of Serbian natural gas market

EU Market – Special Edition - Energy

SPEEDUP OF GASIFICATION

Main player in the natural gas sector is public company owned by the state – “Srbijagas” – in charge of import, transport and distribution of natural gas in Serbia. Besides “Srbijagas” there are 32 small companies for gas distribution

For a very long time, natural gas has been having label of “energy source of the future” due to its many advantages, mostly because of its economic and ecological advantage over other sources of energy. In Serbia, this energy source is not yet common in the households. Industry uses it more, but it is still far away from using all of its potentials. Due to very simple reasons, it reaches consumers with difficulties or doesn’t reach them at all, there are no adequate main route gas pipeline and we can easily say that local distribution network exist only in the territory of Vojvodina.

Serbia is being supplied by natural gas through main regional gas-line – 400 kilometers long - from the border with Hungary (Horgos) to Nis in central Serbia. This gas-line, with the capacity of 6 billion cubic meters annually, has connection with a large number of distributive networks. About 155,000 households and 1,000 industrial consumers in Serbia are being supplied by gas, through distributive network, largely built in Vojvodina, northern part of Serbia. According to the Development Strategy for Energy Sector in Serbia, by 2015. is planned to increase the number of consumers up to 400,000 and to gasify 23 towns, which will increase the level of consumption of natural gas at 4 billion cubic meters annually (current annual consumption is around 2,8 billion cubic meters – of which is domestic production at level of 0,25 billion cubic meters).

Dominating use of natural gas is for heating of industrial facilities – with 39% of total consumption.

Main player in the field of natural gas is state-owned public company – “Srbijagas” – in charge of import, transport and distribution of natural gas in Serbia. Besides “Srbijagas” there are 32 small companies for gas distribution on the market (of which 26 are located in Vojvodina).

Distribution companies in Vojvodina - 2004.

Having in mind large fragmentation in the distribution of natural gas and big market potential, greenfield investments are currently the most favorable way of investment. Beside that, Serbia doesn’t have strategy for transformation and privatization of public-communal companies. Investments in public-owned companies is possible in the process of privatization by tender, auction or through stock exchange.

Investment possibilities in natural gas sector

Serbia does not have natural gas storage yet, but has started construction of storage with capacity of 25-30 % of annual gas consumption - at location of Banatski Dvor. Advantage of the storage Banatski Dvor, compared with other locations, is the possibility that current capacity of 800 million cubic meters can be doubled and with surrounding satelite fields, this could become a big regional storage. That attribute can explain high interest among investors for the completion of this facility. Storage in Banatski Dvor is owned by Srbijagas, but there has been announcements from the Government that storage will be spun-off and offered to strategic partner by tender, for completion.

First phase of construction of gas storage in Banatski Dvor could be finished in 6 to 7 months, and that would boost storage capacity up to 300 million cubic meters, with investment of around 40 million euros. 

Because of need to increase security of supply, several projects for connection with regional gas-lines have been developed:

• Construction of gas pipeline Nis – Dimitrovgrad, for the connection with gas system of Bulgaria; at the beginning, that direction would also supply natural gas from Russia, but with the completion of NABUCO project this could become an alternative way of supply

• Construction of transit gas pipeline to Bosnia and Herzegovina – direction: Batajnica – Bijeljina – Novi Grad

• Construction of gas connector with Romania – direction: Mokrin – Arad

• Construction of gas connector with Macedonia – direction: Nis – Leskovac – Kumanovo

• Construction of gas connector with Croatia – with 3 possible directions: Sombor – Osijek, Backa Palanka – Ilok, Sremska Mitrovica – Vinkovci

Further construction of gas distributive network would allow optimal usage of market potential, which is estimated at 300,000 new consumers.

Serbia has drawn plan of increasing consumption of natural gas, as one of the most important strategic goals in development of energy potentials, and by signing Energy Community Treaty expects significant increase in investment activities in this field.