1. Ministry of Mining and Energy Republic of Serbia www.mem.sr.gov.yu Impact of Energy on stability and Economic Development in the Region Serbian Oil and Gas sector

2. SERBIAN ENERGY MILESTONES  Energy Law is enforced on August 1st 2004  Serbian Energy Policy ( Energy Strategy Paper) was adopted on August 2005. Treaty establishing the SE Energy Community was signed at October 25th 2005Treaty establishing the SE Energy Community was signed at October 25th 2005

3. Serbian Oil sector

4.  Reorganization of PE NIS  NIS a.d Privatization OIL&GAS SECTOR MAIN EVENTS

5. Public Enterprise NIS for exploration, production, processing and trade of oil and natural gas was divided into the new entities: “NIS” a.d. “NIS” a.d. Joint Stock Company for exploration, production, processing, distribution and trade of oil and oil derivatives and for exploration and production of natural gas, Joint Stock Company for exploration, production, processing, distribution and trade of oil and oil derivatives and for exploration and production of natural gas, PE ” Srbijagas”, Public Enterprise for natural gas transport, storage, distribution and trade; PE “Transnafta” Public Enterprise for the transport of oil by the oil transportation pipelines and oil derivatives by product pipelines; AUGUST 2005

6. “NIS” a.d. privatization process At the moment, the Government has an intention to privatize “NIS” a.d. only. The Government passed a decision on the selection of the Privatization Advisor for “NIS” a.d. Merrill Linch&Raiffeisen Investment AG were selected by public tender procedure for Privatization Advisor The Advisor’s task is to prepare and implement the privatization strategy for “NIS” a.d.. The completion of the privatization strategy is expected in June 2006.

7. Domestic oil&gas production 2005 Oil 720.000 t Gas 290.000 cm

8. Oil Products Consumption

10. Oil Processing

11. Retail Network  Private PS 41%  NIS 39%  Lukoil 14%  Eko YU (Hellenic Petroleum) 1%  OMV 2%  AVIA 3% TOTAL 1,250 Petrol Stations

12. OIL CONSUMPTION FORECAST - SERBIA 20022004200620102014 OIL SECTOR (M toe) Final consumption 2.3782.9012.7293.0123.260 Energy transformation 0.1810.2410.2410.3140.364 Non-Energy consumption 0.5300.6060.5910.6250.685 Losses0.2710.3320.3180.3410.352 Total demand 3.364.083.8794.2924.661 Domestic production 0.6670.6700.8130.9741.000 Crude oil import 2.6933.4103.0663.3183.661

13. Serbian Gas sector

15.  Main pipeline - capacity are over 6 billion m³ of gas annually  Natural gas is supplied to app. 1,000 industrial consumers 155,000 households

16. GAS CONSUMPTION FORECAST - SERBIA GAS SECTOR ( M m3) 20022004200620102014 Final consumption 1.587 1.563 1.929 2.345 2.598 Energy transformation 0.042 0000 Non-Energy consumption 0.056 0.432 0.660 0.710 0.760 Losses0 0.005 Total demand 1.685 2.000 2.594 3.060 3.363 Domestic production 0.268 0.242 0.302 0.318 0.400 Natural gas import 1.417 1.758 2.292 2.7422.963

17. Import routes Route Source/dependanciesUS$ million  via Romania (north) Russia 32  via Romania (central)Russia or Caspian/ Iran 76 Nabucco pipeline  via BulgariaRussia or Caspian/ Iran 83 Nabucco pipeline  via Croatia North African LNG36 Croatian terminal  via Croatia and BiHNorth African LNG 73 Croatian terminal  via MacedoniaCaspian/ Iran67 Turkey-Greece pipeline  via MontenegroNorth African LNG 195 Montenegro terminal  via Albania Caspian/ Iran 202 Turkey-Greece pipeline

18. Transit routes Albania Macedonia Croatia Bosnia and Herzegovina

19. Interconnection of Romanian, Serbian and Croatian pipeline systems Project status: potential Interconnection of Serbian and Croatian pipeline systems would provide transit of gas to Croatia, particularly in case of connection to Romania pipeline system (Arad-Mokrin route) Connection imoprt routes: (Arad-Mokrin route)(Arad-Mokrin route) Connection export routes: Sombor-Osijek,Sombor-Osijek, Bačka Palanka-Ilok, Sremska Mitrovica (Šid)- VinkovciBačka Palanka-Ilok, Sremska Mitrovica (Šid)- Vinkovci

20. Potential transit volumes potential transit volumes in 2015, bcm  Croatia 0.5  Bosnia and Herzegovina 1.5  [Montenegro] 1.0  Albania 0.5  Macedonia 1.0  SubTOTAL 4.5  Serbia 3.5  TOTAL 8.0

21. THE PAN EUROPEAN OIL PIPELINE (PEOP) SCHORTEST ROUTE TO EUROPE

22. Future crude oil supply to Black Sea Future crude oil supply to Black Sea

23. THE PAN EUROPEAN OIL PIPELINE PEOP PIPELINE Constanza (Romania) – Serbia –Croatia – Trieste (Italy)

24. Other Bosporus Bypass Proposed Routes

25. POTENTIAL PIPELINE CAPACITY 40 million tonnes per year 60 million tonnes per year 90 million tonnes per year Final design capacity will depend on negotiated agreements with oil producers and refiners

26. A 1319 km pipeline to transport crude oil from Black Sea to Western/Central Europe Start - a new marine terminal in Constanta, Romania Romania Terminate - at in Trieste, Italy Terminate - at in Trieste, Italy Traverses - Romania, Serbia, Croatia, Slovenia & Italy Italy Supplies - Western European Market by directly feeding into the existing pipeline network.

27. CORE MARKET FOR PEOP Industrial heartlands of Northern Italy, Germany, Austria and Czech Republic Refineries supplied by existing pipelines Pipeline fed from Trieste and Genoa, supplied by tankers using the Adriatic and Mediterranean Seas

28. PEOP Target Markets Romania 10-17 Mil.T/y Serbia 5-8 mil.T/y Croatia 5-7 Mt/y TAL 37-40 Mt/y Adriatic 15 Mt/y Other Italian Refineries 80 Mt/y SPSE(25) & Other MED Refineries : 100 Mt/y ----- Demand 2010- 2030

29. PEOP Integration with European Crude Oil Distribution Grid PEOP TAL North Italian Grid

30. BENEFITS OF PEOP Security of Supply for Host Countries and the rest of Europe Substantial Economic Benefits for Host Countries Enhanced Regional Cooperation and Interdependence Reduced Environmental Risk in the Bosporus and Adriatic Sea

31. BENEFITS OF PEOP ROUTE All other projects need export ports - PEOP no ! All other projects need export ports - PEOP no ! All alternative routes would significantly increase port activity in the Adriatic and/or Mediterranean - PEOP no ! All alternative routes would significantly increase port activity in the Adriatic and/or Mediterranean - PEOP no ! All other pojects increase tankers traffic in the Adriatic and/or Mediterranean - PEOP no ! All other pojects increase tankers traffic in the Adriatic and/or Mediterranean - PEOP no !

32. NEXT STEPS Establish PDC Host Government Agreement “Bankable” PEOP Project Promotion Of The Project Agreements with oil producers and refiners, and financial institutions Establish PEOP company Construct First Oil 2013?

33. Conclusions of the Interstate Committee Meeting held in Rome on March 24, 2006  (MoU) is to be signed between Romania, Serbia and Montenegro, Croatia and Italy in the last week of April or in the first week of May.  It is open to Slovenia to join MoU with the Statement to be annexed to the MoU or any other way.  IC concluded that Legal team will prepare the Final Draft of PEOP Project Framework Agreement and all States will participate in it.