In the 17 years of OTF’s operation, the Federation of BiH has only 3% of pre-war oil reserves

Predrag Blagovčanin
Autor 8.3.2022. u 09:08

In the 17 years of OTF’s operation, the Federation of BiH has only 3% of pre-war oil reserves

Photo: Tuzlanski

FBIH instead of 200 million litres of oil reserves, at the time of one of the biggest oil crises, has approx. 7 million litres. The reasons for these devastating figures should be sought in the interests of the oil lobby, the indolent attitude of the authorities, and the fact that the Federation Terminal Operator managed to restore only 3% of pre-war oil storage capacities in 17 years. The consequences of decades of neglect of this problem are borne by citizens who are currently paying almost 3 KM per litre of fuel.

 

Writes: Predrag Blagovčanin

The FBIH Law on Petroleum Products, which entered into force 7 years ago, stipulates that the Federation’s Terminal Operator is the only one authorised to establish reserves of petroleum products and to be the only FBIH-owned oil company representing the “state interest” in the oil market. As such, OTF is directly responsible for establishing three-month oil reserves in the FBIH, which are one of the unavoidable factors in the process of joining the European Union.

The issue of oil reserves is a matter of national security of a country. According to the analysis of the Dutch consulting company “Insights Global”, the oil stocks that exist on the territory of Europe are at the lowest level since 2008. Bosnia and Herzegovina is exempt from these monitoring and analyses as its oil reserves are currently negligible.

The institution in charge of creating the federal oil reserves “OTF” has changed ten managements and ten supervisory boards in 17 years of existence, spending millions of budget funds for the payment of salaries to employees whose number of initially 8 people has grown to over 100 today and for whose salaries, in 2020, 4.4 million KM were allocated.

The number of employees, unfortunately, is not proportional to the results of the work of OTF, financed by the citizens of FBIH, who paid more than 60 million KM for the establishment of oil reserves by paying a fee of 1 pfennig per litre of fuel. Most of these funds for the creation of oil reserves, more precisely the renovation of pre-war built terminals, today remain unused on OTF accounts.

The available data show the absolute inefficiency and incompetence of the management of this institution. Thus, the execution of investment plans in the period 2015-2021 is less than 10%. While for 2020, the realisation of investment procurement plans is less than 2%. With simple mathematics, we come to the fact that OTF, in accordance with the current dynamics, will be fully operational and will store the legally prescribed oil reserves in a few decades.

We remind you that the European Energy Community in 2012 gave Bosnia and Herzegovina a period of 10 years to fulfil the obligations under Directive 119, more precisely, in order for the FBIH to establish reserves of 200 million litres. With a distance of ten years, OTF as well as the competent ministry led by Nermin Džindić managed to realise 3% of the required quantities.

Council of Ministers / photo: Istinomjer

The Secretariat of the European Community for the Tačno.net portal points out that they provided technical assistance in 2014 and 2016 to help our country formulate a model for creating mandatory stocks of petroleum products.

“Bosnia and Herzegovina has no legislation on mandatory stocks of oil and petroleum products at the state level. The Energy Community Secretariat provided technical assistance in 2014 and 2016 to assist Bosnia and Herzegovina in formulating an emergency stockpile model in accordance with Council Directive 2009/119 / EC and is adapted to the institutional set-up of Bosnia and Herzegovina. The Ministry of Foreign Trade and Economic Relations has supported a working group tasked with submitting concrete proposals or actions for a state-level oil stock model in line with the Oil Stock Directive 2009/119 / EC. However, to date, this has not resulted in a positive outcome.”

The Secretariat emphasises that they have recently reiterated its readiness to further assist BiH in fulfilling its obligations.

HDZ-SDA: Recipe for disaster

Under the leadership of Energoinvest-Petrolininvest, Sarajevo had built oil terminals with deposited oil until the beginning of the war. After the war and the establishment of the new territorial organisation of the FBIH, four civilian terminals Blažuj, Mostar, Bihać, and Živinice with a total capacity of 117 million litres belonged to FBIH.

In addition to civilian, in 2006, OTF took over military underground terminals with a total capacity of 83 million litres from the Federal Ministry of Defense.

The technical condition of these terminals is at a very low level. These are the consequences of war events, inadequate maintenance of capacity, obsolescence of equipment, and long-term deterioration due to lack of any activities.

In its 17 years of existence, OTF has managed to partially rehabilitate the terminal in Živinice. The ceremonially opened terminal in Živinice in 2020, with a projected 46 million litres, today, after an investment worth 5 million KM, has a storage capacity of 5.9 million litres, which represents 3% of the commitments.

According to OTF sources, the second phase of the new construction of 40 million litres could start only when the property and legal relations are resolved.

“It has been 8 years since the takeover of the Živinice terminal, and then 9 years until the filling of one-third of the pre-war capacity of this terminal. The strangest thing is that in 2012, the estimated value of the terminal was 12.1 million KM, and after the investment cycle of 5 million KM in 2020, the estimate of these same experts was 14.7 million KM. It is tragic that the opportunity to complete the rehabilitation with the newly designed capacity of 46 million litres was missed. Today’s 5.9 million litres cannot provide a profitable operation for this terminal because the running costs are almost the same for both mentioned options. “

Terminals Blažuj / photo: Sarajevo construction

And how prices are rising as well as budgets for the rehabilitation of the terminal is best shown by the official data from the procurement plans of OTF for the rehabilitation of the terminal in Blažuj.

1.1 million were needed for the rehabilitation of this terminal in 2015, 2.5 million in 2016, 6.7 million in 2017, 4.2 million in 2018, 7.6 million in 2019, 12 million in 2020, and 20 million KM in 2021.

In 2022, OTF is announcing a tender worth 21 million KM for the rehabilitation of the terminal in Blažuj, which is three times more for the same capacity than the originally planned rehabilitation in 2017. The difference in the price of works from the original approx. 7 million KM is justified by the triple environmental protection for which 14 million KM was allocated.

The OTF management also allocated 2.7 million KM for the construction of an administrative building within the Blažuj terminal. Paradoxically, the construction of the administrative building today will cost more than what was needed to renovate the terminal in 2016.

Initially, Energoinvest started building this terminal in 1982, five years later the terminal was operational and filled with oil.

The reasons for this indolence towards oil reserves, as well as the obvious incompetence of management structures, can be observed through the prism of party staffing. For decades, SDA and HDZ cadres have played a key role within the OTF. We remind you that for more than a decade, the president of the OTF Supervisory Board was Rifet Fetić, the head of the reis-u-leme cabinet.

The current duo at the head of this company is Hermedin Zornić in front of the SDA party and Slaven Zeljko, the president of the main party of the HDZ Mostar.

Hermedin Zornić, who was the director in the period from 2014 to 2016 and from 2019 until today, points out that the problem of rehabilitating the terminal is caused by unresolved property and legal relations.

“Looking at the quantities prescribed by law, the situation is not good, but in the superlative, I can say that we have moved from the deadlock in the last two years. We now have 7 million litres of stock in terms of reserves that could mean something.”

Hermedin Zornić / photo: Klix.ba

Speaking about the growth of prices for the renovation of the Blažuj terminal, Zornić justifies the amount of the tender with environmental and European standards that had to be met.

“The price of the tender increased because the projects at that time were not in line with the required standards. I did the re-design of that terminal so that the construction would be in line with all standards, but before that, I had to complete the property legal relations, which were finally resolved after 25 years. We have had some complaints about LOT 1, but I expect that we will start with the realisation at the beginning of May or April. The construction of this terminal will directly affect the prices paid by end-users. “

Who’s affected by market regulation

In earlier statements for the media, Hermedin Zornić pointed out that Terminals are a nuisance. From this time distance, he points out that his statement was as a “fan”. However, he emphasises that in a situation in which the FBIH would have legally prescribed oil reserves, they could regulate the market.

 “We simply cannot be a threat to anyone because we are not registered for any oil trade. We are a society that stores oil in terms of some extraordinary circumstances, war, fire, earthquake. However, if we had the legally prescribed quantities of oil and the value of our goods came out, we could regulate the market, but that is in the domain of the FBIH Government as well as the law. In my opinion, the law on free pricing is incorrect looking at other laws, but I am not the one who can talk about whether the law is correct or not. “

In 2016, the FBIH Railways and the then director of the OTF, Džemal Bašić, signed an agreement that confirmed the readiness of the FBIH Railways to transport oil for reserves at the BiH level.

At a session held in early February that year, the FBiH government issued a conclusion instructing the competent ministries to take the necessary measures to transport oil products by rail, to ensure adequate control over the sale of petroleum products, and to take measures to prevent the use of fuel-oil as a propellant.

To date, the Law on Transport of Dangerous Goods has not passed the parliamentary procedure. OTF directly participated in the working group formed in 2017, which must make a draft of the law. As Zornić points out, the positions are harmonised, except in Article 5, where there is a dispute.

“I suggested that legal entities that transport goods by rail pay 1 pfennig per litre, and persons who transport trucks by tanker pay 3 pfennigs, and that is the problem. The question of all questions is that we have a difference of 2 pfennigs in the mode of transport, and deflation of goods 900 thousand tons. Who takes 18 million? Someone is taking it. I am not entering into the analysis of whether goods that are not in accordance with the law are being transported now, whether the quantity or quality of goods is important and what consequences the movement of tanks weighing 50 tons has on our roads. The most important question is whether smuggling would be possible if the oil was transported by rail. I think that in that context, OTF can be crucial for the entry and exit of oil in the FBIH.”

Enis Džafić / photo: FBIH Railways

Enis Džafić, General Manager of FBIH Railways points out that if oil were transported by rail, the state would have absolute control over the import and quality control of petroleum products.

“For the needs of “Holdina” in 2021, we transported 45 million tons from Ploče and Sisak to their terminal in Podlugovi. We are driving oil from Pančevo for “Gazprom”, which leased terminals in Zenica from the company “HIFA Oil”, which shows that we are competitive with truckers. As far as the law is concerned, the only problem is the collection of the tax, where we ask for a tax to be introduced for CO2 carriers and that this tax be used to invest in railway infrastructure, but representatives of the FBIH Petroleum Products Association are not in favour. “

Džafić emphasises that in the past six years, OTF has not done anything to bring the terminals into operational condition, although the Railways have made free estimates for the rehabilitation of the tracks inside the terminal.

“In Živinice, one railway track was prepared, but we did not drive oil, but the terminal was filled with tanks. So, you have that terminal in Živinice, you have a track and the possibility to fill it via the railways, but they do not do that, nor did they ultimately ask us for an offer. We transport 6,000 tons of oil in 6 trains, the equivalent of 40 trucks. It is symptomatic that large distributors of oil such as “Holdina” or “Gazprom” transport oil by rail, and small distributors do not pay for it. We have a hundred wagons for oil transportation and complete import could be done by rail, but that is not the case.”

Other members of the working group for drafting this law, Milenko Bošković, president of the Association of Petroleum Products of the FBIH, was not in the mood to discuss this topic. Also, the BiH Oil Committee did not respond to our calls for discussion.

Oil prices are high when you lie

Indolence towards the problem of storing mandatory oil reserves is visible right now during the crisis in the oil market caused by the Russian aggression on Ukraine. While the prices of crude oil on the world market are approaching the amount of 120 dollars per barrel, the statements of the Federal Prime Minister Fadil Novalić and the competent minister Nermin Džindić about the FBIH oil reserves are in the last resort frivolous.

Five days ago, the FBIH Government at a thematic session adopted 12 conclusions in response to problems in energy supply. In this context, the FBIH Government instructed OTF and NTF Ploče to make all their capacities available in relation to the supply of oil and oil derivatives.

Also, the Government of FBIH and the competent minister Džindić pointed out the possibility of opening a joint meeting between the Banking Agency, OTF, and the Dretelj terminal about possible filling precisely because of the need to create security stocks.

We remind you that the Dretelj military terminal was awarded to Ljubo Ćesić-Rojs during the war by “Herceg Bosna” for war merits. His company Monitor raised a loan in Hercegovačka bank in the amount of 32 million KM, and this terminal was the collateral for the loan. Since Ljubo Ćesić Rojs did not repay the loan, the underground terminal Dretelj, built in the 1950s, is in very bad condition today and is owned by Hercegovačka bank.

Nermin Džindić / photo: FMERI

The irony of the statements and conclusions of the government and the competent minister Džindić is reflected in the fact that the oil located in the Ploče terminals is not owned by the FBIH and that OTF has 17 million instead of 200 million litres of stock, there are 6 million, which is not even 3% of the pre-war stocks owned by Bosnia and Herzegovina.

Why does the FBIH not have a strategy for the development of the oil sector, why there is no strategic plan, who will be responsible for incredible failures in OTF’s operations, and why the Rulebook on technical and other storage conditions for liquid fuels has been waited on for 7 years, are questions we wanted to talk to the competent minister Nermin Džindić. To our request for an interview, the competent minister did not want to respond.

In the continuation of the series of the Tačno.net portal on the oil sector in Bosnia and Herzegovina, we bring you a story about the reasons why the Audit Office was not allowed to enter the Ploče Oil Terminals.

We remind you that the NTF strategic company FBIH is sovereignly managed by HDZ staff, Josip Tomić, who was convicted by a final verdict for a crime committed in this company.

Predrag Blagovčanin
Autor 8.3.2022. u 09:08