TIRANA, Feb. 24 – Canada-based Bankers Petroleum has suspended arbitration proceedings against Albania by agreeing to hire a third-party auditor over a $57 million tax dispute with the Albanian government, the energy ministry and the company say.
The country’s largest oil producer and foreign investor and the Albanian government have agreed to hire PwC, one of the Big Four auditors, to settle the dispute which escalated in late 2015 with the freeze of the company’s bank accounts. The conflict was somehow settled last December, when Bankers Petroleum reached a deal with the Albanian government over the $57 million tax dispute dating back to 2011 allowing 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.
The energy ministry says it has also agreed with Bankers Petroleum to review the concession agreement to improve its financial terms and inspection procedures by state authorities.
“The audit is expected to commence immediately and conclude within the second quarter. The parties have also committed to using the expert’s determination as the basis for certifying petroleum costs in subsequent years, including calculation of Bankers tax obligations for 2012,” Bankers Petroleum said in a statement.
David French, the Bankers President and CEO, hailed the deal as positive for the both the company and the government.
“Resolving this dispute will send a great signal that Bankers and the government of Albania are working together to encourage investment and development,” he said.
“We look forward to reaching an appropriate outcome, and turning our attention to continuing to manage the Patos-Marinza field for the best interest of the government, the environment, our employees, and the local Albanian communities we serve,” he added.
Energy Minister Damian Gjiknuri has earlier said Albania will renegotiate its oil output-sharing contracts with Bankers Petroleum and other oil companies and impose a limit on expenses that can be used to offset their tax liability.
In the contracts being negotiated with Royal Dutch Shell and Israeli’s Delek Group, Albania is imposing a ceiling on costs for the first time, Gjiknuri has told Reuters.
With international oil prices at a 12-year low, the country’s largest oil producer, Canada-based Bankers Petroleum, says it has delayed its drilling activity and opted to resume as soon as pricing improves.
Last December, the country’s largest foreign investor, 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. 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.
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.
