Liberalization has contributed to on strengthening competition and development of oil products market in Serbia, said Aleksandar Panfilov, general manager of Lukoil Serbia adding that the state must put a stop on to the practices of smuggling and placement of fuels of low quality but and also to find a way of preventing international freight traffic from Serbian from moving on roads of Romania and Bulgaria.

It is worrying that there is a significant reduction in flow of international freight traffic through Serbia. Of course that is primarily associated with the economic crisis but on the other hand it is caused by the fact that the situation in region is changing every day.

When I said that, I hand in mind the active construction of a road and infrastructure grid in Turkey, Bulgaria and Romania. This is athreat to Serbia that, if the state doesn’t pay attention to new developments, it will lose its role a main transit player in the region. This would certainly have a negative impact on our business and businesses of all companies that operate in the market of oil derivatives in Serbia.

This, in turns, would be reflected on the country's economy as a whole, said in an exclusive interview with Balkanmagazin Aleksandar Panfilov, general manager of Lukoil Serbia, -Pioneer-Investors.com quotes- giving concrete examples:

“We all notice long lines and waiting on border crossing, complaints about due high tolls on main travel highways – which makes transit through Serbia one of the most expensive ones in the region. At this moments the government of Serbia should pay atenttion and bring measures which will keep Turkish and Bulgarian carriers, who traditionally prefer to pass through Serbia, on Serbian roads.“

How do You estimate oil derivatives market one year after liberalization in Serbia?

I see the development of the market under positive light, as a whole. As fist – there have been new types of petroleum products which reflected on demand and lower prices. And that automatically affects competition in the market.

To what extent did the fact that excise tax on domestic and imported fuel are equal affect you? This move was purely positive. The strengthening of competition in a developing market doesn’t allow prices to grow – which has an impact on the citizens' standard and reflects positively on country’s budget in general.

Stop the smuggling

What must the government do so that Serbia effectively suppress shadow economy on oil derivatives market?

Smuggling must be rigorously punished. Competent authorities must rigorously control the market. With the implementation of austerity measures it is possible to bring order. It is very important to mention that all derivatives which have been produced in Serbia still don’t meet the euro 5 standard. The other thing is the quality of petroleum products that could be found on Serbian market. So for this reason , I see rigorous quality control as the only solution. Fiscal and police authorities of the Republic of Serbia are working to this direction which I think is good sign for investors making Serbia, under the circumstances, seem more attractive than other countries in the region.

The crisis had certainly affected the market of oil products. What are the results of business of Lukoil Serbia in 2011?

Results are good - which shows a positive attitude on the part of the central company and the main shareholder. Lukoil Serbia is heading for positive results in business for several years from now. That isn’t always enough and you can’t reach full inner satisfaction, however. There are still large reserves and I see progress in the possibility of making the Company more efficient. On that goal we will concentrate our efforts in 2012^th and 2013^th.

Quality and price reduction attract customers

What have You done to attract customers not only in pumps stations but also in wholesale?

The most important thing is to provide quality oil products. Our goal and main focus is to supply the Serbian market with goods that have European quality. During our business of derivatives trading the emphasis is on the sphere of quality service for our client in retail network – on which training we are also working actively and constantly. At the end of the year we decided to reward our loyal customers and to reduce the price of unleaded gasoline euro premium which now has the same price as a regular unleaded gasoline. This move has met with the public's response, because this fuel has the best quality and we get it from refineries owned by Lukoil.

Where does Lukoil Serbia purchases fuel from? Do You have any problems due to low water level of Danube?

Traditionally, we import petroleum products and gas from Lukoil’s refineries in Bulgaria and Romania. Also we have very successful cooperation in this field with NIS „Gazprom Neft“. We hope that such cooperation will continue in the future. Low water level of Danubehas not affected our business because we have sufficient storage capacity as well as alternative supply routes. We didn’t turn only to one partner or source of supply we are opened for mutually beneficial cooperation.

Among Serbian oil companies one can be heard off the record comments that there is a cartel agreement among some participants in the market and that they dictate prices and operating conditions. What is your comment on that?

All main players in the market work by well-known and clear, transparent rules. Our pricing depends on world quotation. All other statements and comments off this question don’t have an economic basis and they are more in the service of other goals.

The country has not even any legislation monitoring market derivatives in Serbia. To what extent has that influenced business for Lukoil Serbia?

The Serbian laws have set very high and strict standards regarding the import and sale of petroleum derivatives. According to them, police and the fiscal authorities of Republic of Serbia exert full control.

Which of the regulations and conditions of business in Russia or any other country where Lukoil does business would you rewrite?

All regulations which concern the petroleum products respond to regulations in the Russian Federation and European Union – but in same cases Serbian regulations are even tougher. When we talk about others that have concerns on exploitation of oil and its processing I don’t have a comment because Russian companies the Serbian market deal exclusively with trade in oil products.

Development

Plans for future operations in Serbia.

Plans could be defined in one word – development. The company's vice president Vadim Varabjov has recently been on a working visit in Serbia. On that occasion, he noted that in Belgrade almost every year people are working on a new bridge or on reconstruction. Of course, our company can’t look passively on that dynamic process of construction and infrastructure development. Certainly we will be engaged in the development and modernization of our retail network.

Is Lukoil interested in launching exploration and exploitation of crude oil and gas in Serbia?

As far as I know Serbian law still allows that. So, this is really a question of economic viability. These questions are for specialized firms and sectors of Group Lukoil.

Country announces tender for exploitation and utilization of oil sale. Will You sign for that?

We are considering this question and we are monitoring the situation in this area. Lukoil has entered the energy sector.

How do You comment on the regrouping of oil companies in the world market and on the fact that some companies – like OMV – are abandoning derivatives transactions and diversifying to other sectors?

It is very inappropriate to comment on the business moves of other major oil companies. Everyone has their own interests and their own goals. Lukoil, as a multinational company, is developing its own manufacturing capacity and retail network allaround Europe. On the other hand Lukoil as a vertically integrated energy company invests in the development of their own energy capacity which is also “scattered” all over the Russian Federation and the European continent. In the last decade our company in Bulgaria started with delivering of electricity, after completion of works on power plants Lukoil Energy & Gas Bulgaria EOOD on work in combined regime generation of electricity and thermal energy ie. in cogeneration mode, which Bulgarian legislation stimulates.

Biodiesel – a political issue

Your estimation of commitment oil EU companies to use biodiesel.

The use of biodiesel is more a political than an economic issue. It is possible that such stipulations could add to fuel price another five to seven percent. I have doubt whether that is necessary for consumers in Serbia. It is not clear what they actually want to pay. That is, in my opinion, a question for the government of Serbia.

What is your view on the fact that car manufacturers are competig about in that who will launch an attractive model of electric car?

The best solution would be when someone could produce a perpetuum mobile. When we put joking aside, in a world which is developing incredibly fast, it is impossible to remain blind on the necessity of application innovation. The automotive industry is a good example of that.