Srbijagas Increases Profits Despite Gas Losses

Serbia's largest gas supply and transport company, Srbijagas, has posted profits of 1.29 billion dinars (€11 million) despite overall losses on domestic gas sales.

The company, which is bound to sell gas below cost due to government caps on domestic gas prices, increased its profits by 42 per cent for 2011. However, the capped gas prices as well as debts owed to it continue to hit its bottom line, General Manager Dusan Bajatovic said today.

At present, the government requires Srbijagas to sell gas to domestic customers at between 20 to 28 per cent below the cost it pays to import this gas from Russia. Consequently, Mr. Bajatovic said, the company has lost approximately €200 million on gas sales.

"This profitdoes not come from the primary activities--transport and sale of gas--because most of the time we were working with prices that are lower than the market," he told reporters today.

The profits posted by the company came from other operations, he said, including chemical and glass production plants and supply.

He said that the prices currently paid by Serbian customers was 20 per cent less than current market rates, making it the second cheapest in Europe, ahead of only Romania. As long as this price remains low, the company will continue to make a loss on gas, Mr. Bajatovic said.

Prices could potentially be brought down by the signing of a new long-term gas contract with Gazprom, he said, and with the completion of the South Stream pipeline. Serbia is one of the eight countries through which the South Stream pipeline will travel. Srbijagas is a joint shareholder with main shareholder Gazprom for the Serbian section of the pipeline.