Oil Report

Serbia, Russia initial deal on oil monopoly's sale

BELGRADE, Dec 1 (Reuters) - Serbian officials and Russian energy company Gazprom GAZP.MM initialled a contract on Monday for the sale of a majority stake in the Balkan country's oil monopoly NIS, a Serbian official said.

Russians agreed to pay 400 million euros ($560 million) for a 51 percent stake in NIS and pledged to invest 550 million euros by 2012 to modernise its refineries, Dusan Mrakic, secretary of state in the energy ministry, said.

NIS is the last of the state-owned oil companies in the Balkans to be sold. It was given a monopoly on processing oil derivatives until 2010 to recover from NATO bombing in 1999 when its refineries were heavily damaged.

The contract for its sale is a part of the wider energy deal agreed between Belgrade and Moscow and signed in January.

It will give Gazprom's oil arm Gazprom Neft SIBN.MM control of NIS in return for Serbia's inclusion in the South Stream gas pipeline. The parties also agreed on construction of a gas storage facility in northern Serbia.

Analysts have said the deal was largely politically motivated. Russia was Serbia’s main ally in its unsuccessful bid to block independence for its former province of Kosovo, which declared independence in February.

The agreement brought the rift within the pro-Western government. Serbia’s Economy Minister Mladjan Dinkic has said the price for NIS was insultingly low, while the party of the Prime Minister Mirko Cvetkovic supported the deal.

Serbian President Boris Tadic and Energy Minister Petar Skundric will travel to Moscow on Wednesday to sign the agreement. (Reporting by Ivana Sekularac. Editing by Anthony Barker)