NIS restored crude-processing volumes at its Pančevo refinery to more than one million tonnes during the second quarter of 2026, marking a significant operational recovery after sanctions-related disruptions forced the facility to halt production temporarily at the end of 2025. The improved refinery performance helped the Serbian energy group return to profitability, although operations remain dependent on temporary sanctions licences and unresolved ownership issues.
Gross refinery throughput reached 1.003 million tonnes in the three months to June, representing a 19% year-on-year increase. On the narrower Refining Block basis, excluding part of the consolidated processing attributable to HIP-Petrohemija, throughput totalled 972,100 tonnes, up 18% compared with the same period last year. As Serbia’s only crude-oil refinery, Pančevo normally supplies around 80% of the domestic fuel market. With a design capacity of approximately 4.8 million tonnes per year, second-quarter processing equated to an annualised utilisation rate of roughly 84%.
Operations Continue Under Sanctions Constraints
Despite the recovery, NIS remains subject to sanctions imposed by the US Treasury Department because it is controlled by Russia’s Gazprom Group. Refinery operations, crude procurement, banking transactions and oil deliveries via Croatia’s JANAF pipeline continue to depend on temporary licences issued by the US Office of Foreign Assets Control (OFAC). The licence in force at the end of the reporting period was scheduled to expire on July 31, 2026. The company submitted a new application on July 27 seeking uninterrupted operations, although no further extension had been confirmed when second-quarter results were published.
While the refinery has demonstrated it can operate at high utilisation when crude supplies and financial transactions are authorised, its longer-term stability remains tied to its ownership structure, continued access to the JANAF pipeline, international banking services and the willingness of suppliers and trading partners to conduct business with a sanctioned company.
Production resumed after NIS obtained a specific licence on December 31, 2025, enabling crude deliveries to restart. Fresh crude reached the refinery in January, allowing operations to recommence after a shutdown lasting more than a month. During the outage, the company completed maintenance work, including an overhaul of the S-4700 unit and replacement of the catalyst in the DC-4302 reactor at the diesel hydrotreating plant. Despite the technical challenges of restarting during winter conditions, the refinery resumed production according to schedule.
Processing Volumes and Feedstock Mix Improve
Operational momentum strengthened during the second quarter. Processing reached around 336,000 tonnes in April, an increase of 11.3% from March, before remaining at levels sufficient to supply the domestic market with diesel, petrol, aviation fuel, liquefied petroleum gas, bitumen and other petroleum products. During the first six months of 2026, NIS processed 1.67 million tonnes of raw materials within its Refining Block. Imported crude accounted for 1.13 million tonnes, or approximately 68% of total feedstock, while domestic crude contributed 424,000 tonnes and semi-finished products almost 115,000 tonnes.
The figures underline the refinery’s continued dependence on imported crude, with domestic oil production insufficient to sustain operations near full economic capacity. Access to supplies through the JANAF pipeline remains essential. Sanctions and geopolitical disruptions have also forced the company to adjust its crude procurement strategy, relying more heavily on spot-market availability. Reduced supplier flexibility has increased the importance of pricing premiums, payment arrangements and shipping schedules, while limiting crude selection and potentially affecting refining margins.
Higher Throughput Drives Financial Recovery
Improved refinery operations contributed to a sharp rebound in NIS’s financial performance during the second quarter. Quarterly revenue rose to RSD105.5 billion from RSD73.5 billion a year earlier. EBITDA increased from RSD1.7 billion to RSD24.1 billion, while the company moved from a RSD5.1 billion net loss to a RSD7 billion net profit.
For the first half of 2026, revenue climbed to RSD171.7 billion, compared with RSD145.8 billion in the corresponding period of 2025, an increase of nearly 18%. EBITDA more than tripled to RSD35.1 billion, up from RSD10.2 billion, while the company reported a RSD9.8 billion net profit, reversing a RSD3.6 billion loss recorded during the first half of the previous year. Higher oil prices also supported financial results. Average Brent crude prices reached USD92.60 per barrel during the first half, compared with USD71.70 a year earlier. In the second quarter alone, average prices increased to USD104.50 per barrel, versus USD67.80 in the corresponding period of 2025. The combination of higher petroleum-product prices and lower-cost inventories accumulated before the price rise created a favourable margin effect. NIS cautioned, however, that this benefit could reverse as higher-cost crude inventories move through the refining and sales system during the third quarter.
The company also noted that refinery profitability depends on the spread between crude costs and refined-product values after accounting for processing, transport, energy consumption and inventory timing. Rising oil prices therefore do not necessarily translate into stronger margins if procurement costs increase more rapidly than regulated or market fuel prices.
The Serbian government has continued intervening in the domestic fuel market through retail price controls, temporary excise reductions and export restrictions, measures intended to protect consumers but which also shift part of the commodity-price risk to NIS and public finances.
Cash Flow, Investment and Environmental Compliance
Operating cash flow improved to RSD16.6 billion during the first half, compared with RSD1.7 billion a year earlier. Second-quarter operating cash flow was slightly negative as the company rebuilt inventories and purchased higher-priced crude. Bank debt declined to EUR364.9 million at the end of June from EUR515.6 million a year earlier, reducing leverage despite continuing sanctions-related constraints on access to international financing and US dollar transactions.
Capital expenditure totalled RSD11.8 billion during the first six months, slightly below RSD12.4 billion in the same period of 2025. Investment in exploration and production increased from RSD6.9 billion to RSD9.2 billion. By contrast, downstream investment fell significantly. Refining, sales, energy and petrochemical activities received around RSD2.2 billion, compared with RSD5.1 billion a year earlier. Direct refinery investment declined from RSD2 billion to RSD1.2 billion, while spending on sales and distribution dropped from RSD2.3 billion to about RSD600 million.
Since 2009, more than EUR1.4 billion has been invested in the Pančevo refinery, including over EUR300 million for the Bottom-of-the-Barrel delayed coking project, enabling the plant to convert heavier feedstocks into higher-value products such as diesel, petrol, LPG and petroleum coke. The company continued reliability upgrades, including replacement of critical rotating equipment, reconstruction of industrial rail infrastructure, automation of fuel-loading systems and improvements to fire-protection facilities.
Environmental compliance also advanced as NIS prepared and verified greenhouse-gas emissions reports for both the refinery and HIP-Petrohemija under Serbia’s new regulatory framework, an early step towards alignment with European monitoring, reporting and verification standards.
Sales, Petrochemicals and Ownership Developments
Despite stronger refining operations, first-half petroleum-product sales declined to 1.4 million tonnes from 1.52 million tonnes a year earlier. Motor-fuel sales fell from 1.19 million tonnes to 1.09 million tonnes, while retail volumes dropped from 514,200 tonnes to 441,200 tonnes. Sanctions affected commercial activity, with some corporate customers reducing cooperation, payment difficulties disrupting business relationships and the company’s filling stations in Bulgaria remaining temporarily closed. NIS also began disposing of its businesses in Romania and Bulgaria, subject to transaction conditions and OFAC approval.
Wholesale activity proved more resilient. Second-quarter wholesale sales increased to 343,200 tonnes from 292,100 tonnes a year earlier, helping offset weaker retail and export performance. Overall second-quarter petroleum-product sales remained broadly stable at 807,400 tonnes, compared with 805,300 tonnes in 2025. HIP-Petrohemija also reported stronger operations, with production rising 11% to 141,000 tonnes and sales increasing 20% to 146,800 tonnes during the first half. Although the company remained loss-making, its net loss narrowed from RSD4.7 billion to RSD1.5 billion, while negative EBITDA improved from RSD4.1 billion to RSD900 million.
Ownership remains the principal unresolved issue. Gazprom Neft and Gazprom jointly own 56.15% of NIS, while the Republic of Serbia holds 29.87%, with the remaining shares owned primarily by minority investors and employees. MOL Group has reached a preliminary agreement to acquire the Russian-controlled stake in a transaction reportedly valued between EUR900 million and EUR1 billion. Completion remains subject to OFAC approval and fulfilment of agreed conditions involving the Russian sellers, MOL and the Serbian government.
Separate negotiations between Serbia and MOL envisage the state increasing its ownership by 5 percentage points to around 34.9%, strengthening government influence over strategic decisions without financing a full acquisition. MOL has also committed to maintaining production at the Pančevo refinery at historically established levels. The company already operates refineries in Hungary, Slovakia and Croatia, providing opportunities to optimise crude procurement and regional product logistics.
Potential participation by ADNOC as a minority investor could further diversify crude supply and strengthen commercial links with non-Russian producers. During the first six months of 2026, NIS calculated liabilities for taxes and other public revenues amounting to RSD101.4 billion, underscoring the company’s importance to Serbia’s public finances. Although refinery operations have returned to commercially efficient levels, future crude deliveries, financing arrangements and investment decisions remain dependent on temporary regulatory approvals until a permanent ownership solution is secured.
