Serbia faces mounting energy security challenges involving Russian gas supplies, the ownership of Naftna Industrija Srbije (NIS) and investment in alternative infrastructure. Temporary operating permissions and supply agreements have maintained short-term stability, but the country remains exposed to geopolitical disruptions that could affect industrial production, energy costs and investment planning.
- NIS Ownership and Refinery Operations Remain Unresolved
- Gas Supply Agreements Highlight Import Dependence
- EU Energy Rules Increase Pressure for Alternative Gas Routes
- Niš Gas-Fired Power Plant Adds to Fuel Procurement Requirements
- Electricity Networks, Storage and Nuclear Development Require Capital
- Energy Policy Shapes Industrial Investment Conditions
The US Treasury has extended NIS’s operating licence, allowing the Pančevo refinery to continue operating, while Gazprom has agreed to supply natural gas to Serbia under existing commercial terms until the end of the current supply agreement. The next government will need to address both arrangements while developing alternative import routes, restructuring strategic energy assets and attracting investment in electricity generation and infrastructure.
NIS Ownership and Refinery Operations Remain Unresolved
Russian companies Gazprom and Gazprom Neft control approximately 56.2% of NIS, whose Pančevo refinery is Serbia’s only domestic oil refinery and a key component of the national fuel supply system. US sanctions associated with Russian ownership have left Serbia dependent on temporary operating licences while negotiations continue over a possible acquisition of the Russian stake by Hungary’s MOL Group. The extensions allow operations to continue but do not establish a permanent ownership arrangement or resolve the sanctions restrictions.
An interruption at Pančevo could force Serbia to increase imports of refined petroleum products, exposing consumers and industrial companies to additional transport costs, regional supply constraints and international fuel-price volatility. Alternative governance arrangements for NIS, including temporary management mechanisms, have been proposed as options alongside nationalisation. Any such approach would require legal assessment and compliance with the applicable sanctions framework.
Serbia’s immediate challenge is to preserve refinery operations while establishing a permanent ownership and governance structure that satisfies regulatory requirements and supports continued investment in domestic petroleum infrastructure.
Gas Supply Agreements Highlight Import Dependence
Serbia consumes approximately 3 billion cubic metres of natural gas annually, with Russian deliveries accounting for a substantial share of total supply. An extension of the agreement between Gazprom and Srbijagas secured additional deliveries under existing commercial conditions. The limited duration of the arrangement leaves uncertainty over future supplies.
Serbia has begun diversifying procurement through its gas interconnection with Bulgaria and agreements with Azerbaijan. The contracted supply framework with Azerbaijan provides for deliveries of up to 400 million cubic metres annually, equivalent to approximately 13% of Serbia’s estimated annual gas demand. Diversification requires more than supply contracts. Serbia must also secure cross-border transportation capacity, access to available gas volumes and commercially viable delivery arrangements.
Russian gas remains economically attractive under existing contractual terms, but evaluating its price without accounting for the potential cost of a supply interruption would leave a significant part of the financial risk unaddressed. Gas storage can provide temporary protection against disruptions, although it cannot permanently replace diversified imports.
EU Energy Rules Increase Pressure for Alternative Gas Routes
The European Union’s planned phase-out of Russian gas imports creates an additional consideration for Serbia’s energy policy. Under EU Regulation 2026/261, Russian liquefied natural gas imports are scheduled to be phased out by the beginning of 2027, while remaining exemptions for long-term pipeline gas contracts are due to end by autumn 2027. The restrictions apply to EU member states and do not automatically prohibit Russian gas deliveries to Serbia, which is not an EU member. Nevertheless, the country’s EU accession ambitions increase the importance of aligning its energy strategy with European diversification and security policies.
Planned gas interconnections with Romania and North Macedonia could expand access to alternative suppliers and regional trading markets. A connection through North Macedonia would provide an additional route towards Greece’s gas system and LNG import infrastructure, while a Romanian link could improve access to regional gas trading hubs. These projects could strengthen Serbia’s negotiating position but would require investment in pipeline construction, transportation capacity and storage, potentially alongside higher procurement costs. Their economic value must be assessed against the possible costs of interrupted industrial production, fuel shortages and emergency imports.
Niš Gas-Fired Power Plant Adds to Fuel Procurement Requirements
Serbia’s plans for new gas-fired electricity generation create additional requirements for long-term fuel security. Elektroprivreda Srbije (EPS), Srbijagas and Azerbaijan’s SOCAR have signed a shareholders’ agreement to develop a combined-cycle gas power plant near Niš. The proposed facility would have capacity of up to 500 MW and produce electricity and heat, support industrial development in southern Serbia and improve flexibility in the power system.
The project envisages a joint venture in which the Serbian companies collectively hold 50%, with SOCAR holding the remaining 50%. Completion is targeted for 2030. Developing the plant before securing sufficiently diversified, long-term gas supplies could expose the project to additional financial risks. Lenders and investors will need to assess procurement agreements, transportation availability, electricity-market revenues and sensitivity to fuel-price fluctuations.
Gas-fired generation can provide flexibility as Serbia expands wind and solar capacity. Its commercial contribution, however, depends on reliable fuel deliveries at competitive prices. Without adequate supply arrangements, additional generating capacity could increase exposure to external energy markets.
Electricity Networks, Storage and Nuclear Development Require Capital
Beyond petroleum and gas, Serbia must address investment requirements across its electricity sector, including EPS generation assets, transmission and distribution networks, renewable generation, battery storage and demand-side flexibility. These areas are central to strengthening energy security and developing a financially sustainable electricity generation portfolio.
Serbia must also determine whether nuclear power should form part of its long-term energy strategy. France has emerged as a potential strategic partner, while cooperation with Russia’s Rosatom and broader geopolitical considerations remain relevant to the debate. A nuclear programme would require extensive feasibility studies, regulatory capacity, financing arrangements and lengthy development periods. It would therefore not address immediate vulnerabilities involving oil and gas supplies.
Large pumped-storage projects, including the proposed Đerdap 3 development, could improve long-term power-system flexibility but would require substantial capital expenditure and detailed assessments of technical and environmental risks. The investment challenge is to finance a more diversified energy system while keeping electricity and gas affordable for households and industrial consumers.
Energy Policy Shapes Industrial Investment Conditions
Serbia’s next government will need to establish a sustainable operating framework for NIS, secure gas supplies beyond existing contractual arrangements and prepare contingency measures for possible refinery or pipeline disruptions. Over the medium term, the investment programme will need to address alternative gas procurement, storage capacity, regional interconnections, electricity infrastructure and generation diversification.
The European Union could contribute through infrastructure financing, energy-market integration and cooperation on alternative supplies, although Serbia would still need commercially viable projects and credible regulatory arrangements. For investors, lenders and major industrial consumers, the issue extends beyond the comparative price of Russian gas. Reliable energy availability and predictable operating costs are essential to evaluating industrial and infrastructure investments over their full operating lifetimes. Serbia has maintained short-term stability through negotiations and temporary arrangements, but its energy system remains exposed to geopolitical and regulatory uncertainty.
