Gazprom Neft holds a 56% stake in NIS, the largest energy company in Serbia, but the company vows to do business “outside politics” and support the country’s EU integration, Kirill Kravchenko, CEO of NIS, told EURACTIV in an exclusive interview.
Kirill Kravchenko, born in 1976 in Moscow, has studied sociology in Russia, financial management in the UK and is a doctor of economics science. He has worked for YUKOS company, before joining Gazprom Neft, where he held various executive positions. In February 2009 he was appointed CEO of the Serbian Petroleum Company NIS
He spoke to EURACTIV’s Senior Editor Georgi Gotev.
Can you introduce the company you are leading?
NIS is an energy company working actively in the region of the Balkans, being represented in 11 countries. Its headquarters is in Serbia, where we play a leading role in the country’s economy. We represent 9% of the country’s GDP, the same as the sector of agriculture, which is considered as strategic in Serbia. We are a public company, with a majority shareholder which is Gazprom Neft. And we have minority shareholders, the largest of which is the Serbian government, which gives us stability. We have also a lot of small shareholders, more than 2.5 million, from investment funds to ordinary citizens of Serbia. This is why we have to work by the sweat of our brow and respond to the highest European standards in the field of corporate governance. We regularly disclose information about our activities in more extent than required by law, we regularly attend all corporate conferences, we have built all our procedures and governing bodies in accordance with European practice.
Another specificity of our company is that we conduct our activities in a region ranging from Austria to Greece, and all countries surrounding Serbia. We don’t reach out to other countries.
The third specificity is that, at the level of stakeholders, we decided to develop as a vertically integrated company, which means to cover activities ranging from exploration to bringing energy to the final consumer, in all segments. That’s why we have exploration, production, processing in two oil processing plants, we have a wide distribution network, more than 500 filling stations in the Balkan region. Apart from that we develop businesses with other partners, such as petrochemical industry.
In terms of realization of our strategy, firstly we tend to invest a lot in research and development, some 500 million euro a year. Secondly, it’s about people, we have an international team of more than 20 countries, from India to Canada, and also from many European countries. We have agreements with universities, from Belgrade to Brussels, and we invest a lot in youth.
Finally as a last element I will mention technology. There we use the power of Gazprom, but also partnerships. In several fields we have identified strategic partners. In the field of unconventional oil drilling, our partner is Halliburton. In the production of base oils our partner is Chevron, etc.
Regarding figures, our yearly turnout is over €2.5 billion, our yearly profit is over €450 million.
How much tax did you pay to Serbia?
The sum is the equivalent of 12% of all taxes collected in Serbia.
And what is the exact percentage of the Gazpom neft share in NIS?
It’s 56%. The Serbia government holds 26% and 19% of the shares are on the free market.
Can we call NIS a monopoly in Serbia?
No. As retail sales, we have less than 40% of the total. In Croatia, INA has more.
And in term of refineries?
In terms of refineries, both Serbian refineries are ours. But that’s normal for refineries. Bulgaria has one, Croatia has one, Bosnia has one.
What brings you to Brussels?
We work quite actively in EU countries as well. We have business projects in Romania, in Bulgaria, in Hungary. We need to work together with EU institutions, not only to answer the requirements of EU law, but to have the same internal procedures. In addition, we try to help the entire region, including first of all Serbia, to integrate faster in the EU.
One may thing the opposite. Gazprom is Russia’s gas export monopoly and Russia doesn’t want EU enlargement to continue. How about that?
I have seen opposite point of views in the media. But we are outside politics. There is an official strategy of NIS, which has been approved by all shareholders, including Gazprom Neft, and this strategy commits us to provide maximum assistance to Serbia’s EU integration. Business is dictating its conditions. We need new clients, we need new partners. Geographically, it’s clear that Serbia is part of Europe. And it’s normal that Serbia should have relations with other countries. Serbia is culturally close to Russia, but it also builds constructive relations with China, with USA, with the Middle East.
I’m asking because days ago the Russian Ambassador to Belgrade was on a visit to Serbia-controlled Northern Kosovo, where he said “the EU cannot solve your problems, stick with Russia”. Have you been instructed to keep Serbia away from EU membership?
Firstly, no, I haven’t. Secondly, that would contradict our economic interests. For shareholders and for the company in general it’s of vital interest to develop ties with the EU countries and the Union as a whole.
How about the Gazprom-favoured South Stream planned pipeline, who will run through the region? Is this project linked in any way with your activities?
There is no direct link. We are trying to increase gas production of oil and gas not only in Serbia, but in the region. We are a different type of business. It’s true that our main shareholder is the same as South Steam’s, but these are different projects running according to their own principles. I’m personally convinced that South Stream will bring benefit to the region as a whole, because it will bring additional gas resource and stability. For our business, it’s not a matter of utmost importance. It is possible that we would participate, together with other partners, in electricity generation projects, using gas from South Stream, but for the projects we have already started, we have enough gas of our own.
Your main investment projects concern the former Yugoslavia?
No, because Bulgaria, Romania and Hungary are also covered.
So you are not resuscitating former Yugoslavia?
Even if we wanted to, we wouldn’t succeed now. But we would like to develop economic relations between the countries for mutually beneficial cooperation.
How do you find the investment climate in Serbia, in the region? Is it worsening as a consequence of the crisis?
It’s a complicated question, because according to analysts, Europe is not the best place for investments now. But if we look at the regions where we are active, it’s not the worst place in Europe for investments.
There are much bigger economies in worse situation. Also, in terms of legal norms and taxation, this region is much more attractive than the majority of European countries. And also, because in these countries there are areas of activity, such as infrastructure, agriculture or energy, which unlike in Western Europe are still not occupied by other companies.
How do you think, will the EU survive the crisis? Aren’t you frightened by the eurozone crisis?
Without any doubt, as any large company, we are assessing all types of risks and we adapt our decisions to the level of these risks. At the present moment such risk exists. But in spite of it, we see potential for development for the region, which we have formulated in our strategy. If there would be any changes in our surroundings, we will adapt our strategy. But our strategy, which is linked to regional development, to becoming N.1 in terms of effectiveness, becoming one of the major players in terms of economic results, will continue to be implemented. It can be fine-tuned, but we won’t change the course forward.