SET 2023: The region does not yet have an alternative for gas and coal, energy cooperation is necessary, but when a crisis occurs, it's each country for itself

Source: eKapija Tuesday, 04.04.2023. 12:53
(Photo: ssuaphotos/
Despite the green transition, the region does not yet have a viable alternative to gas and coal; economic development without oil will not be possible for a long time; regional energy cooperation goes without saying, but once a crisis occurs, it's each country for itself; it is necessary to align with reality, and reality is that we are 100% dependent on Russian gas - these are some of the messages from the panel "Regional approach to the supply of energy sources (gas, oil, coal) at the time of the energy crisis with reference to the decarbonization process in the region" held at this year's SET.

Milovan Bajic, director of Krajina Petrol Banja Luka, was the panel moderator and the participants were: Momcilo Antonic, director of Gas-RES Banja Luka, Nedeljko Elek, director of Sarajevo-gas Istocno Sarajevo, Tomislav Micovic, representative of the National Petroleum Committee of Serbia - World Petroleum Council (NNKS- WPC), Aleksandar Ivankovic, executive director of Optima Group a.d. Banja Luka, Hermedin Zornic, director of FBiH Oil Terminals, Janez Roser, general manager of Premogovnik Velenje Slovenia.

Moderator Milovan Bajic pointed out that gas, oil and coal are still dominant in the region, and that coal, especially in Bosnia-Herzegovina and Serbia, is still dominant in the production of electricity. According to him, the region has common issues, as well as differences, but everywhere the dominant issue is energy security. As he pointed out, the history of mankind is permeated with the struggle for energy, and energy is an activity where politics is dominant and often an obstacle to development.

Economic development is impossible without oil, the state should not set prices

Tomislav Micovic, representative of the National Petroleum Committee of Serbia - World Petroleum Council (NNKS-WPC) stressed that regional energy cooperation is a given, especially pronounced in the case of oil derivatives.

- The market resisted precisely because of that regional cooperation and the possibility of supply. There were no supply problems in any of these countries. The Mediterranean, as a large resource of both crude oil and oil derivatives, is available to us, and in that sense we have no problems, but logistically there have been major upheavals. I don't think we should relax, changes occur daily, but there are reasons for optimism. We have all strengthened together and I believe that the risks of oil supply will stay just that- risks - Micovic stressed.

Answering the question on whether administrative pricing can provide good results in the long term, Micovic explained that he understood the position of the state which desires to protect both the economy and citizens, but that it should have been stopped as soon as the negative effects began.

- We should all keep in mind the experience of Hungary, which saw fuel being sold at gas stations in 5 liter amounts and with different prices for locals and foreigners, which led to license plates being sold at the entrance to Hungary. Hungary experienced serious consequences of its meddling, eventually it had to let the market go, of course the prices skyrocketed, but there was fuel. As for Serbia, it is supplied with oil derivatives from Pancevo. That percentage was sometimes 62%, sometimes 67%, and in 2022 it is 80%. We have managed to ensure in the last few months that the prices are set in such manner that the import of derivatives is possible, because for us, when only one percent is missing, a collapse occurs. The Government decree defined that NIS has the obligation to sell diesel to farmers at a price of RSD 179, whereas a liter was also RSD 220 - Micovic explained.

Despite the energy transition plans and the narrative about the need for diversification, the economic development without oil will not be possible for a long time, Micovic emphasized.

- In 2020, 96% of the energy used in transport came from oil. It hasn't changed much in these three years. The development of the economy without oil will not be possible for a long time, every year oil production is higher than the previous one, and it has been like this for decades, with the exception being the COVID year. If we talk about the energy transition, estimates show that in 2030 and 2040 there will be a much smaller supply of oil. We do not see the future, electric cars are the past, lithium ion batteries are the present, I believe that we will soon see some new technological solutions for the future - said Micovic.

(Photo: SET/3D Media)

Slovenia's experience – EUR 250 million for a just transition

Janez Roser, general manager of Premogovnik Velenje Slovenia reminded the audience that Slovenia has been working on a gradual transformation from coal in the last decade, and that it still has only one lignite mine and one thermal power plant.

- In Slovenia, experience shows that the state must think about its capacities and strategic reserves. We all thought that the crisis would slow down the green transition, that didn't happen, but currently we still don't have any alternatives to gas and coal. Europe recognizes hydrogen as a potential form of the future, and maybe in 10 years we will talk differently, but until then we have to recognize the things we have at hand - emphasized Roser.

He points out that the green transition will be very expensive, and as he said, we are all aware of that.

- Slovenia will stop mining coal and its production from this energy source by 2033 at the latest, but the question remains of how to implement a just transition for both workers and the region. About 30% of the people in the region depend on thermal energy, so the social aspect is also important. Slovenia received around EUR 250 million from the Just Transition Fund. We are preparing projects with which we will get alternative sources, but those funds will also be used for a fair transition for everyone who works in the sector - Roser explained.

Republic of Srpska recognized the need for gasification in time

Momcilo Antonic, director of Gas-RES Banja Luka reminded the audience that, currently, this part of Europe receives gas from two directions. The northern direction goes from Ukraine, Hungary and Serbia, while the other direction is the Turkish or Balkan stream.

- 25-30 billion cubic meters of natural gas passes annually in these two directions. The disruption of any route for any reason - and we see that sabotages do happen - can significantly affect the entire market and the price of natural gas in the area. Demand growth in the Asian market can significantly affect the global gas market. Increased consumption in winter is another factor influencing the market. We had a rather mild winter and currently the warehouses in the EU are filled up to 60%, but there is an EU directive to fill them up to 90% by November, that is, by the beginning of the heating season. We have yet to see what the cost of getting that gas will be, but it could affect the whole market. The fact is that the majority of natural gas consumers record a decline, except for natural gas consumers who are involved in the production of electricity, so that is also a certain indicator and we should think about whether this is a new trend that we should deal with - Antonic pointed out.

According to his words, the state recognized the need for gasification of the Republic of Srpska in time.

- Currently, we have one interconnection, we have no storage capacity for gas, and we are exclusively dependent not only on Russian gas, but also on storage facilities that rely on Russian companies. In some places, compressed natural gas may be a good solution, e.g. in the northwestern part of the Republic of Srpska, which is relatively less demanding when it comes to the construction of gas pipelines. In the mountainous part, the investments are huge - emphasized Antonić.

Gasification of Jahorina a priority

Nedeljko Elek, director of Sarajevo-gas Istocno Sarajevo, pointed out that this company, together with the Government, launched the gasification project of the eastern areas of the Republic of Srpska, including 6 municipalities and the Jahorina ski center.

- The priority is to carry out the gasification of Jahorina and the gasification of the heating plant in Istocno Novo Sarajevo. I hope that we will commence this year, energy and tourism are the two main branches of this region's development. We are obliged to decarbonize the region by 2050.

The only link between fossil and decarbonized energy is gas and it's only natural that the gas grid grows and I'm glad we all agree on that. We need to adapt to the reality, and the reality on the ground is that we are 100% dependent on Russian gas, and whether we will be connected to the eastern or western connection in the future, whether we will take gas from Azerbaijan does not matter, but we must create a gas network - said Elek, reminding that both entities should develop their networks.

(Photo: SET/3D Media)

Investments in oil terminals until 2025

Hermedin Zornic, director of the FBiH Oil Terminals, said that for almost 15 years, they worked on resolving legal property issues, which have finally been resolved in the past three years, and the Law on Petroleum Derivatives was adopted in 2014.

- In the time period, 2020/2021. we managed to solve the first phase of the construction of the terminal in Zivinice, it is the first time that the Federation has binding reserves of oil derivatives. In part of the Sarajevo region, we have an oil terminal in Blazuj, we started the works in 2021, and now we are in an advanced stage of completion. I believe that a 42 million cubic meter terminal will be opened by the end of the year. We have completed the selection of the most favorable contractor for the works in Bihac, so I expect us to enter the investment process in Bihac at the end of April, for a total volume of around 80 million liters. This year should be crucial because the largest and, in my opinion, the most beautiful continental terminal in Mostar with 83 million liters will be completed, together with all the revisions. With all those investments, we could close the cycle by 2025 and do what the European directive requires us to do - said Zornic.

Europe increased its monthly expenditure on fossil fuels by USD 14 billion

Aleksandar Ivankovic, executive director of Optima Group a.d. Banja Luka, pointed out that Europe managed to drastically change its energy balance last year, which is great, because diversification is good, but in the end we need to calculate where it led us.

- Last year, compared to the year before, Europe increased its expenditure on fossil fuels from USD 16 billion USD per month to USD 30 billion. In terms of gas, we are less dependent on Russian gas, we have more LNG, liquefied natural gas, which is good for diversification, but expenditures have increased from USD 9 billion to USD 35 billion per month. So, something was not done properly in that portfolio change and we should ask ourselves how are we going to rectify that. We heard that we have a huge solar potential in solar power plants, but we are a little worried about how we will balance them - Ivankovic pointed out.

According to him, we should not forget that we are a developing country, and in the period 2020-2030 we must use those energy sources that will give us the opportunity to strengthen the economy.

- We are facing a difficult energy transition. In the energy balance, we have 2% of gas, Croatia 16%, Hungary 32%. Our opinion is that gas is number one in that transition because after the development of the gas infrastructure, we will provide a great stimulus to the economy. After 2030, if the investments of solar parks and wind farms are materialized, the same gas will very likely be the energy source that will provide us the possibility of balancing. If we solve all this wisely, Bosnia-Herzegovina has the possibility to be a productive, not to say rich, country in the period 2030-2035. If we don't resolve it, we lose the incredible opportunity that this situation gave us - said Ivankovic.

He pointed out that Serbia is doing great things, but when a crisis occurs, it's every country for itself.

- During the winter, the delivery of diesel from Serbia to Bosnia-Herzegovina was suspended, and we know that of all our fuel needs, 85% is diesel. We were left to ourselves and commercial organizations. It is an example that if we provide support to commercial organizations, they are the only support for the state in crisis situations. We understood that there would be no diesel from Serbia, we leased all the remaining storage capacities in Croatia, I think that was a key decision. The similar story in with gas, it will be more and more dominant, and we do not have a gas infrastructure in Bosnia-Herzegovina - Ivankovic concluded.

The Energy Summit Trebinje 2023 was held from March 22 to 24, organized by Elektroprivreda RS, the City of Trebinje and SET.

Portal eKapija is the media sponsor of the Summit.

M. Dedic

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