Serbia mulls replacements for Russian crude at Pancevo

Serbia's energy ministry said it is "doing everything" it can to ensure feedstock supply to the country's 96,000 b/d Pancevo refinery after the EU's embargo on seaborne imports of Russian crude takes full effect later this year.

Although Serbia is not an EU member state and Belgrade does not support sanctions against Russia, Pancevo receives most of its feedstock through the Adria pipeline that starts at the port of Omisalj in Croatia, which is an EU member.

"This means that there is no possibility for more Russian crude to be delivered to Pancevo," the ministry told Argus. Pancevo's operator NIS, which is controlled by Russian state-controlled Gazpromneft, "can import all other types of crude, except Russian", the ministry said.

Serbian president Aleksandar Vucic said last week that the country "will no longer have the right" to import Russian crude from 1 November, although the EU is offering a six-month transitional period for existing contracts until 5 December. NIS' current transport contract with Adria operator Janaf runs until 31 December.

A spokesperson for the European Commission would not comment today on any possible exemption for imports to Serbia via Croatia. The commission noted that the EU is calling on third countries to implement the bloc's restrictive measures, adding that it is working on improving energy security in the western Balkans, including Serbia.

NIS already cut the share of Russian crude in its slate to just 17pc in 2021 from over 27pc in 2020. It boosted the share of Iraqi medium sour Kirkuk blend to 51pc from 44pc over the same period. It also more than doubled its intake of Iranian Heavy and processed Norwegian Johan Sverdrup crude for the first time last year.

The Serbian energy ministry would not be drawn on replacements being considered for the relatively cheap Russian feedstock at Pancevo. "Depending on further developments regarding the supply of energy products in Europe, the competent institutions of the Republic of Serbia will analyse the situation and make appropriate decisions in order to preserve energy security," it said.

The ministry noted that demand for non-Russian crudes is likely to increase. "One of the expected consequences of the new EU sanctions package is the pressure on demand, as other countries will also seek alternatives to oil imports from Russia," it said.

A few days after the EU's Russian oil embargo was adopted, Vukic told state television that sanctions will take $600mn/yr "directly from the pockets of the citizens of Serbia", adding that Iraqi oil is now $31/bl more expensive than Russian.

In addition to "resolving the supply issue", Serbia also needs to increase its crude stocks to provide extra security "in the event of market disturbances", the ministry said. It also said it is updating plans to add new crude pipeline links to Pancevo from neighbouring Romania and Hungary because "Serbia, as a landlocked country, must also consider additional sources of supply".

For the time being, pipeline imports are exempt from the EU's Russian oil ban. "If we had built an oil pipeline to Hungary, we could now take Russian crude to Serbia without any problems," Vucic said last week.

By Bela Fincziczki and Dafydd ab Iago

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