Pancevo
Republic of Serbia

NIS is the largest oil company in Southeast Europe. Fifty one percent of NIS shares is held by the Russian Gazprom Neft.  Corporate headquarters are located in Novi Sad and Belgrade and production facilities are located across the whole territory of Serbia.  NIS is the only Serbian company which possesses an integrated and well balanced system of production, refining and trade of crude oil and petroleum products, as well as natural gas exploitation and which plays a significant role in stability and security of energy supply.  The company deals with crude refining, sales of petroleum products, and exploitation of hydrocarbons in Serbia and Angola. Annual NIS crude oil production totals ca. 1 million tons.  NIS owns two oil refineries, Pancevo Oil Refinery and Novi Sad Oil Refinery, with total refining capacity of ca. 7.3 million tons per year. There is an LPG production facility, so called Elemir LPG refinery.   Oilfield services business deals with geophysical exploration, drilling and well testing , hydro probing, transportation, workover and civil construction services.   In addition to its retail network (480 petrol stations), NIS also owns oil depots all over Serbia. The company is a leading supplier of petroleum products in the Serbian market. NIS exports motor fuels, benzene, toluene), road and industrial bitumens to the EU countries, Ukraine, Croatia, Montenegro and Bosnia and Herzegovina.  The company employs 11,000 people.  Its 2008 revenues were approximately USD 4.7 billion.

Construction of a Mild Hydrocracking Complex and Hydrofinishing in Pancevo Oil Refinery is the main element of the modernization program foreseen by the Sales and Procurement Agreement. Modernization of the NIS refining complex represents a crucial condition, necessary for leading the company towards a strategic position of a regional leader at the market of petroleum products.

The goals of the project are to secure the competitiveness of NIS when Serbian petroleum product market becomes deregulated as it is planned for the end of 2010, maximal adherence to local and European environmental protection standards, as well as fulfilling the obligations defined by the sales and procurement agreement for 51% of NIS shares.

Construction of a Mild Hydrocracking Complex and Hydrofinishing will enable for the quality of the fuel produced to reach the level of European standards, as well as to increase the production yield.

This complex will consist of five new production units. In addition, as a part of construction process of this complex, additional 19 facilities of industrial infrastructure, required for the operation of the MHC and Hydrofinishing Unit will be reconstructed, modernized and constructed.

Mild Hydrocracking Complex and Hydrofinishing Unit represents an intermediary phase between the processes of primary and secondary crude refining. The main purpose of this unit operation is to increase the depth of crude refining, to eliminate from crude the maximum amount of sulfur, mercaptane and other chemical compounds which have an adverse effect upon the quality of finished products and upon the crude refining process.

Start of operation of the MHC and Hydrofinishing Unit will enable the Pancevo Oil Refinery to start producing unleaded motor gasolines: once the unit starts operating at full capacity, the scope of production of this type of fuel will amount to 638.000 t/y. Besides, the yield of domestic Euro diesel produced in Pancevo Oil Refinery will be significantly increased– from the existing 230.000 tons to 1.538.000 tons per year. In addition, positive effects will be also produced by the new method of energy supply which will enable the lowering of the cost price of petroleum products due to lowering of electricity consumption.

Total value of the project of MHC complex construction equals over 396 million EUR. Besides the construction of the mild hydrocracking complex, as a part of meeting the investment obligations, Gazprom Neft will allocate resources for the construction of the hydrogen generation unit at the site of the Pancevo Oil Refinery.

Start up of this complex is planned for the third quarter of the year 2012.

Once the hydrocracking and hydrofinishing unit is put into operation in the Pancevo Oil Refinery, NIS expects an increase in profit for more than 271 million EUR per year.

Crucial reason for the start of the implementation of the MHC and HF project construction are positive ecological effects.

As a part of the project scope additional cleaning facilities will be constructed and owing to this construction NIS expect a crucial change of situation related to the air pollution in the town of Pancevo, at whose territory NIS Refinery is located. Thus the MHC construction project includes the construction of the sulfur regeneration unit, sulfur granulation unit, amine regeneration unit, sour water stripper, flare for burning of hydrocarbon gases and flare for burning of acid gases. In addition, this project plans the construction of a system for industrial waste disposal, whose operation will prevent the pollution of air, ground and surface water and soil.