The size and structure of energy sources in Serbia are very bad. The sources of quality fuels, such as crude oil and gas are only symbolic and they account for less than 1% of the total balance reserves, the remaining 99% being accounted for by various kinds of coals, among which the low-quality lignite prevails, its share in the total balance reserves being more than 92%.
Furthermore, energy is not being consumed rationally and the total energy efficiency is low. The primary energy consumption totaled 13.56 Mt.en in 2004, of which 8.21 Mt.en was accounted for by local energy sources and 5.34 Mt.en by imported ones, in which the shares of imported crude oil, gas and coke were about 62%, 33% and 5% respectively. Serbia's import dependence in 2004 was equal to that in 1990 (39.4%).
The development of Serbia's energy sources sector has been practically at a standstill from 1990 onwards. The stiff UN Security Council sanctions imposed in May 1992, including an oil embargo, disintegration of the former Yugoslavia and wars in the neighbourhood, collapse of the single electric power system of the former SFR of Yugoslavia and, lastly, NATO bombing in 1999, caused enormous damage and a big lag that cannot be made up for at short notice.
The main purpose of the energy sources system is the creation of new and better conditions for operation, business and development of the energy producing and consuming sectors, which in turn would give an impetus to the economic development of Serbia, protection of the environment and integration of the local energy sources sector into the regional and European energy markets. The achievement of the mentioned purpose is conditional on the implementation of five priority programmes relating to the following:
- Technological modernization of the existing energy producing systems,
- Rational use of power sources and risen energy efficiency in the energy production and consumption sectors;
- Investment in the construction of new power source facilities,
- Exploitation of new renewable energy sources (biomass, small hydroelectric power stations, geothermal energy, wind energy and solar energy),
- Lessening the harmful emissions in the energy production and consumption sectors.
It is necessary to carry out a technological modernization of the existing energy infrastructure and provide for supplementary production of electric power and heat energy in the existing and new facilities.
In the 2000-2005 period, substantial donations were made and favourable loans extended to the mining and energy sources sectors, the biggest donor being the European Agency for Reconstruction.
The reorganisation of the Electric Power Industry of Serbia (EPS) began in 2003 with the separation of the underground coalmines from it, followed by the establishment of 10 subsidiary companies in its framework. Eight enterprises engaged in ancillary lines of business for EPS are going to be transferred to the Privatisation Agency, which also goes for 25 other enterprises engaged in ancillary lines of business in eight other public enterprises. The transfers to the Privatisation Agency will also include 30 EPS hotels and recreational centres, 11 other ancillary enterprises and 24 enterprises operating in the framework of other public enterprises, as well as the remaining six ancillary EPS enterprises.
The Serbian Government has not reached a consensus on either the need for or modalities of privatisation of production facilities.
Preparations for privatisation of the basic segments of the Oil Industry of Serbia (NIS). Article 172 of the Energy Sources Law provides that the Serbian Government should set the organisation of businesses in the energy sources sector for the business that has been conducted by public enterprises before the effective date of the mentioned law. To that end, at its session of 7 July 2005, the Government decided to establish three new public enterprises, the line of business of which would be as follows: (1) natural gas transport, storage, distribution and marketing; (2) transport of oil by oil pipelines and oil products by oil-product pipelines; and (3) prospecting, production, processing, distribution and marketing of oil and oil products and natural gas prospecting and production.
The putting of the Government's decisions into effect entails the abolishment of the Oil Industry of Serbia Law, which has already been included in the agenda of the current session of the Serbian Assembly.
International tenders should be invited by the end of July for the privatisation consultants of the Novi Sad and Pančevo oil refineries and in early 2006, tenders are going to be invited for the majority shares of these refineries. However, a consensus has not been reached on this matter either in the political or professional/management communities.
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The new Power Sources Law should provide for a single development policy to be conducted on the Republic level and create conditions for continuous and even development in the field of power sources. Pursuant to the Power Sources Law, the Serbian Assembly adopted on 23 May 2005 the Strategy of Long-term Development of Power Sources in Serbia until 2015, which set the chief aims of the new power sources policy and the priority courses of development.
The Energy Efficiency Agency was established in late May 2002 and the Power Sources Agency on 23 May 2005. The Agreement on the Energy Community of the Countries of South Eastern Europe was signed in March 2005 under the European Commission's auspices.
The following matters are going to be covered hereinafter: (1) status of energy sources in Serbia; (2) legislative and economic conditions for operation; and (3) priorities and projections of development as provided by the Strategy.
 M t.en - Million tones expressed in the oil equivalent
 There are two mutually opposing options: to sell at once or sell after restructuring (which entails new borrowing
Prepared by the SURVEY S&M EDITORS
Translated by: Milutin Dovijanić