TIRANA, Dec. 15 – The country’s largest foreign investor, Canada-based Bankers Petroleum, has announced a sharp cut in investments and oil production fueled by record low international oil prices and an ongoing tax dispute with the Albanian government which is expected to have negative effects in the 2016 government revenue.
In its 2016 budget, Bankers Petroleum says it plans to invest $56 million in its Albania operations in 2016, down from a revised $153 million in 2015 and a record high of $291 million in 2014, hitting a record low since 2009.
The company anticipates the 2016 average production levels to decline by about 15 percent compared to 2015 when average production for the first three quarters of 2015 dropped by 5 percent to 19,805 barrels of oil per day (bopd).
Average oil production reached a record high of 20,690 bopd in 2014 as average realized prices were at $77.26/barrel compared to $42.3/barrel in the first three quarters of this year.
“We have put together a strategic and fully funded capital program that leverages our operational flexibility while prioritizing the strength of the company’s balance sheet. This plan will maintain balanced spending throughout the year, utilizing available cash flow to position the company well at the end of 2016 and beyond,” said David French, the company’s president and CEO as quoted in a statement.
Bankers says its drilling activity will be conditional upon a moderate recovery in oil prices in the second half of 2016.
The company will also invest $3.5 million in its newly acquired oil block in Hungary to fund a 3D seismic shoot.
The company’s investment and production plans will also affect government revenue in the royalty tax it collects from oil sales. With international oil and base metal prices at a record low affecting the country’s exports, the Albanian government has been suffering a sharp cut in income from the mining royalty, the key tax Albania collects from oil and mining production in the country.
Data published by the customs administration shows the mining royalty which is levied at a rate of 4 to 10 percent, dropped by a sharp 46.5 percent to 2.6 billion lek (€18.3 mln) in the first three quarters of this year compared to the same period in 2014, being one of the key reasons for the underperforming government revenue during this year and registering the lowest level since 2011.
Few days ago, Canada-based Bankers Petroleum reached a deal with the Albanian government over a $57 million tax dispute that will allow the country’s largest investor to regain control of its Albanian bank accounts and operate under normal conditions by paying the disputed amount in instalments while expecting the results of a third-party audit and a possible solution by Paris-based ICC International Court of Arbitration.
Bankers, whose shares at the Toronto Stock Exchange after the escalation of the conflict with the Albanian authorities lost 65 percent during the past couple of months hitting a six-year low of C$0.93 on Dec. 14, has agreed to pay a 10 percent deposit of the original $57 million tax assessment and make monthly payments of $4.27 million during 2016.
Eleven years after launching its operations in the Patos-Marinze heavy oilfield under a 25-year concession deal with the Albanian government, Bankers Petroleum has not started paying profit tax yet, which under Albanian law, companies operating in the oil industry pay at a 50 percent rate only after meeting their investment costs.
Bankers Petroleum says it has invested $1.4 billion during its 11 years of operations in Albania, becoming the largest foreign investor and employing over 1,500 people.
