JUST WITH SOME POLITICAL WILL: Cheaper natural gas and elimination of Russia’s monopoly

According to the latest available data of the BiH Agency for Statistics on the energy balance from 2016, natural gas has a share of only 4% in the final energy consumption. There is no domestic exploitation of natural gas, so the State relies on the import of this energy-generating product, and currently there is only one point of entry into Bosnia and Herzegovina, in the place called Šepak near Zvornik.

Natural gas comes to BIH through several thousand kilometers of gas pipelines passing through Ukraine, Hungary and Serbia. So, Russia has an absolute monopoly on the BiH gas market and the danger of a “gas crisis’’, as it happened in January of 2009, is always lurking.  

Apart from the non-existence of another source of natural gas due to lack of infrastructure, i.e. non-existence of an alternative gas pipeline, a significant contribution to the Russian gas monopoly on the BiH energy market is given by the complex state system. Namely, the legislation governing this area, Regulation on the organization and regulation of the gas industry sector of the FBiH Government and the RS Law on Gas, is under the competence of the entities and so far no agreement has been reached to centralize this issue, which would create conditions for addressing diversification of gas sources, but also other problems in this sector. The key stopper in this process is the authority in the Republika Srpska, i.e.  SNSD and its leader Milorad Dodik, who has been publicly declared as a “guardian of Russian interests in BiH”.

Natural gas market in BiH 

Main and the only natural gas supplier in BIH is the Russian Gazprom. The gas supply contracts with Gazprom are renewed annually, and agreements on natural gas transit with Serbia and Hungary are valid for 10 years. 

Having in mind that the natural gas sector is not centralized, and that there are data update problems, the only data usable as the source of basic information on the gas market in BiH are the data of the USAID Project “Energy Investment Activity” (USAID EIA). 

According to these data, the activity of natural gas transportation in BiH is done by three companies: BH-Gas d.o.o. from Sarajevo, Sarajevo gas a.d. from Istočno Sarajevo and Gas promet a.d. from Istočno Sarajevo, while 9 companies are registered for the activity of distribution and gas supply in BiH: Sarajevo-gas d.o.o. from Sarajevo, PE Visoko ekoenergija d.o.o. from Visoko, Sarajevo-gas a.d. from Istočno Sarajevo, Zvornik stan a.d. from Zvornik, CNG Energy d.o.o. from Banja Luka, Prvo gasno društvo d.o.o. from Zvornik, Bijeljina gas d.o.o. from Bijeljina, GAS-RES d.o.o. from Banja Luka, Energy prime RS d.o.o. from Trebinje and Alumina d.o.o. from Zvornik. 

Below is an overview of the business operations, ownership structures and other available details related to the listed companies. 

BH-Gas d.o.o. from Sarajevo is a company for gas production and transport founded by the Government of FBiH in 1997, whose main activities are the transport of natural gas through BiH, its sale to the industrial consumers and distribution companies, and research and development of main gas pipelines. Inspection of the available data on the operations of this company, which is 100% state-owned, shows that it is financially stable and that it has positive operations balance year after year.

Enterprise Sarajevo gas a.d. from Istočno Sarajevo was established in 1994 and its main activity is transport and distribution of natural gas. The transport is done on Zvornik-Kladanj section, which is part of the main gas pipeline Zvornik-Sarajevo, and distribution is limited to the consumers in the municipalities Istočna Ilidža and Istočno Novo Sarajevo. The largest shareholder in this enterprise is the RS Share Fund with 30% of shares, followed by the RS Pension Reserve Fund with 10% of shares, and the RS Restitution Fund with 5% of shares, while the remaining 55% of the shares is distributed between investment funds and natural persons. According to the available data on business operations in 2019, this enterprise had generated revenue of approximately 4.3 million KM, but had operated with the loss of 64.000 KM.

Gas promet a.d. from Istočno Sarajevo was established in 1998 and performs activity of managing natural gas transmission system on the section of the main pipeline “Šepak-Karakaj” and high-pressure gas pipeline “Karakaj-Zvornik”. According to the equity ownership structure the major shareholder in this enterprise is PE Srbijagas from Novi Sad with 39,14% of the shares that are under the control of the Russian Gazprom, followed by: the RS Share Fund (State equity) with 26,09%, the Pension Reserve Fund with 10%, the RS Restitution Fund with 5%, and the remaining 19,77% is distributed between investment funds and natural persons. The business operations of this enterprise are financially stable and has positive operations balance year after year. 

Cantonal public utility enterprise Sarajevo-gas d.o.o. from Sarajevo was established in 1975 and 100% owned by the Sarajevo Canton. Its main activity is distribution of natural gas through the distribution network and natural gas supply through the distribution network. The gas distribution network of different pressures, managed by the enterprise, is more than 1.300 kilometers long and use to serve more than 65.000 customers. According to the available financial parameters this enterprise has positive operations balance.

Visoko Municipality is 100% owner of the PE Visoko ekoenergija d.o.o. that manages gas network of around 100 kilometers in length and delivers natural gas to approximately 1.900 consumers. The data on business operations of this enterprise show that it has positive operations balance and that it is financially stable.

Joint stock company Zvornik-stan manages distribution network in the City of Zvornik, which is also majority owner of this company. According to the financial data the company has positive operations balance.

CNG Energy d.o.o. from Banja Luka is owned by the company CGE Engineering Srl from Milan (Italy). Information on business operations of this company indicate that it has been having a negative operations balance for years now and that it hasn’t implemented none of the pompously announced projects in Republika Srpska. 

The ownership structure of the enterprise Prvo gasno društvo d.o.o. from Zvornik, whose name is similar to the name of the company Prvo plinarsko društvo from Croatia that is associated with the destruction of Aluminij in Mostar, was established in 2017 and its ownership structure leads back to Pančevo in Serbia and the company Bedem Energy Solutions that is doing distribution of compressed natural gas (CNG). Financial indicators show that this enterprise has positive operations balance.

Bijeljina gas d.o.o. managed 24-kilometer-long gas pipeline Šepak-Bijeljina and more than 300 kilometers of distribution network in Bijeljina, whose construction has started 10 years ago, but still hasn’t carried a single cubic meter of natural gas. The enterprise is majority owned by Srbijagas from Novi Sad, the direct partner of Russian Gazprom. Completion of gasification of Bijeljina  is announced for the end of 2020.

Enterprise GAS-RES d.o.o. from Banja Luka is owned by the RS Government, and should have fully shone through the projects of Republika Srpska’s gasification, which were planned as part of the construction of the large gas pipeline “South Stream”. Since the “South Stream” fell through in 2014, the business operations of this enterprise came down to realization of the natural gas supply contract with the Russian Gazprom. However, the gasification becomes actual again with the beginning of the project “TurkStream” and in December 2017 GAS-RES and Gazprom signed a Protocol on establishment of a joint enterprise, and in July 2020, according to the portal Capital.ba, a location for construction of a facility for converting from gaseous to liquid phase state.  

Energy prime RS d.o.o. is an enterprise registered in Trebinje at the address Kralja Petra I Oslobodioca no. 55, and a visit to this location showed that there is no sign indicating its head office. The director of the enterprise is Tomislav Lovrić, former executive director for economic-financial, accounting and commercial affairs in Mostar’s Aluminij, and owner of this company is a company of similar name - Energy prime from Mostar owned by Marijan Primorac, who is also owner of the company Primorka known for its business operations with Mostar’s Aluminij. Establishment of this enterprise in Trebinje is particularly interesting since neither Trebinje nor any other municipality in that region is found in any gasification strategy.

Alumina d.o.o. from Zvornik is daughter company of Alumina Factory Birač that is undergoing bankruptcy proceedings thanks to the money laundering by the Russian tycoon Vladimir Romanov through the Lithuanian Ukio Bank. Many affairs, about which Žurnal has frequently wrote,  are associated with this company. 

This overview of companies, whose activities are related to import, transport and distribution of natural gas in BiH, is yet another confirmation that due to lack of other sources the Russian gas has monopoly position on the BiH market, since majority of these companies are related to Russia either through their operations and/or ownership structure.

Solution to BiH problems with gas 

Although the reserves of Russia’s natural gas are practically unlimited, and although the experts in the GONG’s research claim that no one can have cheaper gas than Russia, which can give it for free, if necessary, geographic and strategic position of Bosnia and Herzegovina enables the dependence on Russian gas to be minimalized. The only condition to be met is to generate political will for consolidation of legislative and strategic documents, which are now under competence of the entity and the subject of dispute.

Everything that has been presented can be illustratively shows through gas infrastructure development plans of two key, already mentioned, enterprises, Gas promet from Republika Srpska and BH-Gas from Federation of BiH.

Apart from the already existing natural gas entry point in Šepak near Zvornik Gas promet a.d. from Istočno Sarajevo has in its strategy a plan to build another entry point near Bijeljina. So, both the second natural gas entry point and the entire gas strategy are relying exclusively on the Russian, originally planned and then failed “South Stream”, and now already certain “TurkStream”, while no one is thinking about the gas source diversification due to the influence of politics. Also, when it comes to expansion of the distribution network, the plans only relate to the North and West part of Republika Srpska, while the East part, as well as connection with the Federation of BiH, have been left out.

(Strategy of Gas promet)

BH-Gas d.o.o. has significantly more comprehensive strategy that includes the entire country, and beside the existing natural gas entry point at Šepak near Zvornik, also entails additional three entry points, i.e. interconnections: North interconnection (Brod – Zenica), West interconnection (Tržac – Bosanka Krupa with branches to Velika Kladuša and Bihać) and South interconnection (Posušje – Novi Travnik with a branch to Mostar).

 (Strategy of BH-Gas)

The South Interconnection has the best chance of construction soon, and the professionals claim it could meet most of the needs of the small BiH market, but also enable the much-needed diversification of gas sources. In that way, the Russian gas monopoly would be eliminated, considering that it is planned to secure gas supply for BiH from the liquefied natural gas (LNG) terminal on the island of Krk in Croatia, as well as to connect to the Ionian-Adriatic gas pipeline (IAP) which will supply the countries of the region with the gas from Azerbaijan.

However, the construction of the South Interconnection is being obstructed by the Government of the Republika Srpska, which was covered by Žurnal at the beginning of 2019.

Based on all the above, it can be concluded that the citizens of Bosnia and Herzegovina can have the cheapest and most environmentally friendly energy by ensuring the necessary political will to unify gas legislation and strategic documents.