New gas storage in Serbia

By EBRD  Press Office
@ebrd

€150 million sovereign loan to build gas storage in Serbia

The EBRD is helping Serbia to improve its energy security with a €150 million sovereign loan to finance the upgrade of the country’s gas transmission network and the construction of a new gas storage. The loan is extended to Srbijagas, state-owned company responsible for transmission, storage, distribution and trade of natural gas.

Serbia is dependant on gas imports for 94 per cent of its total consumption and represents the only route of gas supply to the neighbouring Bosnia and Herzegovina. The existing gas storage in north-east Serbia is only sufficient to supply district heating companies and households, and does not have the capacity to service industrial customers.

The construction of the second underground gas storage in Serbia will ensure enhanced stability of gas supply, helping the country and the region to become more resilient against disruptions and the impact of seasonal consumption swings. The gas storage will be located at one of the Itebej gas fields, in the northern Serbia, and will have a capacity of up to one billion cubic meters. It will be used for both strategic and commercial purposes, with Srbijagas as the sole operator.

As part of the project the EBRD will also finance the rehabilitation of 40 per cent of Serbia’s gas network, which is between 20 and 40 years old and in some parts has reached its maximum service life. Close to 1000 km of gas pipes will be inspected and repaired network with the Bank’s funds.

In addition, a part of the EBRD funds will be used to refinance Srbijagas’ short-term loans, which will enable the company to improve its capital structure and free up resources for key strategic capital intensive projects aimed at connecting Serbia’s gas transmission network with those of the neighbouring countries. This will significantly improve the gas network infrastructure in the region, boosting the competitiveness of the market.

 The EBRD financing will promote the acceleration of reforms in the Serbian energy sector in line with the relevant EU directives including unbundling of its transmission, distribution and trading activities, liberalisation of the gas market and increased independence of the energy regulator. The loan will also support the reorganisation of Srbijagas, which will improve its corporate governance standards.
 “This project will boost Serbia’s energy independence and will increase energy security in south-eastern Europe. It will equip the region with necessary infrastructure to mitigate disruptions in gas supply and will help Srbijagas integrate into the pan-European energy network,” said Riccardo Puliti, EBRD Managing Director for Energy.

 “We are very pleased to have the EBRD’s support for this important project for Serbia but also for the region and hope that this is just a fist step in the cooperation between JP Srbijagas and the Bank. The financing provided by the EBRD will enable JP Srbijagas implement its development strategy and grow into an important player in south-eastern Europe”, said Dusan Bajatovic, JP Srbijagas’ CEO.

This is the third gas storage project financed by the EBRD. In 2009 the Bank provided €70 million to Plinacro to acquire a gas storage facility in Croatia and €200 million to MOL for completion of the construction of an underground gas storage in Hungary. The EBRD is currently considering for financing in 2010 gas storage projects in Bulgaria and Moldova.

Since the beginning of its operations in Serbia, the EBRD has committed close to €1.8 billion in the Serbian economy, mobilising additional investments worth more than another €1.7 billion.