The sluggishness of the state in the implementation of this infrastructure project was not seen as a major failure because the market prices of gas were relatively low.
Minister of Finance Siniša Mali said a few days ago that Serbia is buying gas from two Hungarian companies that is stored in that country for our needs and that we have already paid an advance of 250 million euros.
He announced that the agreed 500 million cubic meters of gas will be stored in Hungary until October 1st and that we will then have three million cubic meters of that gas per day in October, then six million cubic meters of gas each in November, December, January and February. daily and in March three million cubic meters.
The cost of 250 million euros, however, would not have been if the capacities of the “Banatski Dvor” underground warehouse had been expanded. Representatives of the Fiscal Council (FS) in the latest analysis of the problems of our energy in the light of the global crisis, state that the expansion of the capacity of this storage was announced from the moment it was put into operation in 2011, because it was already recognized then that for complete security in gas supply it is necessary larger warehouse. However, those plans have not been implemented to date and we still have the same gas storage capacities as 11 years ago. The results of the analysis clearly show that currently one of the biggest infrastructural “bottlenecks” is the insufficient capacity of the existing gas storage. It is neither possible to store the quantities that we basically need during the winter season, nor do the technical characteristics of the warehouse allow us to squeeze enough of this fuel out of it on a daily basis.
According to the information obtained by FS, the latest plans suggest that the first phase of the warehouse expansion in “Banatski Dvor” should be completed by the end of this year. In this way, it would receive a “warehouse” with a total working capacity of 750 million cubic meters of gas, with the possibility of squeezing up to 10 million cubic meters of this fuel daily, which is, in principle, enough to meet the needs of the country in the medium term.
“Given the importance of this project for the entire country, the government would have to be directly involved in its implementation and ensure that this time the expansion of the gas storage is completed within the stipulated time.” Since there is no official information on whether the works on this project have started and at what stage, we estimate that it is unlikely that we could get an expanded storage facility before the official deadline that could be in use during the upcoming heating season. Although it is an absolute priority, we think it is good that the government is trying to find some short-term solutions in the meantime, such as the agreement with Hungary, according to which Serbia will be able to store part of the gas in the warehouses of this neighboring country”, the FS said.
They add that the sluggishness of the state and “Srbijagas” in the implementation of this extremely important infrastructure project for the country in previous years was not seen as a major failure because the market prices of gas were relatively low and stable, at a level that was close to the tariff we pay for deliveries by long-term contract with Russia, even when additional quantities of gas had to be procured on the stock exchanges, this did not have a negative impact.
When it comes to the contracted quantities from the agreement with Russia, in the next three years, Serbia will be able to count on deliveries of the same amount of gas that it received under the previous long-term contract – about 2.2 billion cubic meters per year. The new contract price should, as before, be determined according to the oil formula, that is, the purchase price of gas that “Srbijagas” will pay will depend on the movement of market prices of oil and oil derivatives. Because the import price of gas depends on the prices of oil and oil derivatives that were current nine months before the moment of its delivery, it is already possible to roughly estimate how much “Srbijagas” will pay for the contracted Russian gas until the end of the next heating season.
“Starting from the price of gas that we have paid to Gazprom so far ($270 for 1,000 cubic meters, which is about 240 euros), and taking into account the realized increase in the price of oil and oil derivatives in the past nine months, our calculations show that the average price would gas according to the new contract until March 2023 could be slightly higher than 350 euros for 1,000 cubic meters. This means that Serbia expects the price of the gas it procures under the long-term contract with “Gazprom” to increase by almost 50 percent on average by the end of next winter, and after that the contract price will depend on further trends in the global market of oil and oil derivatives. However, the shortcoming of the new three-year arrangement is that the contracted amount of 2.2 billion cubic meters of gas per year is not enough to meet the current needs of the country for this fuel. By all accounts, ‘Srbijagas’ will have to procure these missing quantities at conditions close to the market, which means at a price of almost 1,000 euros per 1,000 cubic meters or possibly a little cheaper.
If we sum up the quantities of gas and the prices that this company will pay for regular and additional imports, the calculation shows that the weighted average purchase price of this fuel for Serbia by the end of the next heating season will be significantly higher than the contract, and it will be in the range of 490-530 euros for 1,000 cubic meters”, notes the FS, Politika writes.
