Serbian Base Oil Plan Shelved

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Russian oil major Gazprom Neftconfirmed that plans to build a base oil plant at a Novi Sad, Serbia, refinery owned by its subsidiary have been postponed indefinitely.

An industry analyst said it is possible the refinery may close due to low domestic sales and a lack of funds or enthusiasm on the part of Gazprom Neft. The Russian company has a controlling stake in NIS, the Petroleum Industry of Serbia, which operates the Novi Sad refinery.

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This refinery will wait for better times, and we do not give up hope on it. At the moment, we operate a small lubricants blending plant and some storage facilities there, Kirill Tyrudenev, general director of NIS, said in a recent interview for the companys corporate newsletter.

He added that management now focuses on improving the refining capabilities of a NIS fuel refinery in Pancevo, Serbia. That project does not include construction of a base oil plant.

In 2008, when Gazprom Neft bought a controlling stake in NIS, one of the main stipulations of the deal was modernization of both refineries. In 2013, management presented a plan to construct a base oil plant in Novi Sad with capacity to produce 180,000 to 200,000 metric tons per year of paraffinic and naphthenic base oils, with a target opening date of 2015. However, this plan was never brought to fruition.

Limited resources, low domestic sales, the unstable economic situation in Russia and conflicts with the West all impacted plans for the Novi Sad refinery, Zorica Davidovic, general manager of Bargos Loa, a Belgrad-based consultant and management firm, told Lube Report.

We are getting scarce information about what is really going on at NIS. At the moment, Novi Sad is producing finished lubricants at its low-volume blending plant there, Davidovic said, adding that the old refinery can produce only solvent raffinate, used for production of metalworking fluids.

Under the 2008 deal, the Russian company pledged to keep the Novi Sad refinery running during the subsequent 10 years.

Novi Sad refinery

Photo courtesy of NIS

Since that term has already expired, and Tyrdenev said that Novi Sad should wait for better times, I assume this [alludes to] the idea Gazprom has been discreetly mulling recently – to close the Novi Sad refinery, Davidovic said.

She contended that the facility is obsolete and should be replaced with a wholly new complex. The Russians dont have the money nor the will for it – it is unreasonable to own two refineries 100 kilometers apart in a small country such as Serbia.

NIS has insisted numerous times before that it does not plan to close the refinery.

Davidovic believes that Gazprom Neft has focused more resources on modernization of the Pancevo refinery and that Novi Sad is a more likely candidate for closure.

The only base oil producer in the Balkans is Rafinerija Ulja Modrica, with its 78,000 t/y API Group III base oil plant in Republika Srpska, Bosnia and Herzegovinas Serb-dominated political entity. The base oil and lubricant production facilities there are owned by Zarubezhneft, which is owned by the Russian government.

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