Prime Minister Edi Rama says Bankers Petroleum is responsible for damage done by well eruption, adds government will hire international auditor to review contract the Canadian oil company signed back in 2004
TIRANA, April 9 – Albania’s largest foreign investor, Bankers Petroleum, has come under fire over meeting safety and contractual obligations following the eruption of water and gas from two of its oil wells, which caused property damage and forced the evacuation of about 70 local households in south-central Albania last week.
With increased focus over the incident, authorities are also starting to question whether Bankers, a Canada-based publicly-traded company with most of its operations in Albania, is paying its fair share of taxes.
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 paid 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. The company does pay millions each year in royalties and other taxes.
An audit carried out by the National Agency for Natural Resources has recently found that Bankers has already recovered its investments costs and should have started paying profit tax since 2011.
However, the company said in its 2014 financial report that it has to recover another $175 million before starting paying the 50 percent profit tax.
“At December 31, 2014, $175 million remains to be recovered in the cost recovery pools representing Bankers cumulative capital investment in Albania of approximately $1.3 billion,” the company said.
Reacting to accusation of lack of transparency over technology used in its drilling operations and financial contributions to the Albanian government, Bankers said in a statement that it took all measures by activating its emergency response plan after the explosion of the two oil wells as a result of carbon dioxide release during drilling.
Video footage showed fountains of gas, mud, sand and water coming out of the ground, but fortunately there were no immediate injuries.
Some villagers complained of having ill-effects from inhaling the released gas, while the company said the gas was harmless.
The company said it will compensate damage to local households and will rehabilitate the affected area.
Commenting on its operations in Albania in the past decade, Bankers says it has invested more than $1.2 billion, reviving the Patos-Marinze oilfield which numbered 2,000 workers at the end of 2014, and accounting for 35 percent of foreign direct investment in Albania.
Bankers also said it has paid the Albanian government around $500 million in mining royalty and other taxes in past decade.
Angry prime minister vows to make Bankers pay
Speaking on Wednesday, Prime Minister Edi Rama blamed Bankers Petroleum as the only party responsible for the explosion and called for full compensation of damage to local residents and rehabilitation of the area.
He also said the government will hire an international company to audit the contract between the Albanian government and Bankers.
“We will request a specialized international audit as happens in all normal democratic countries to guarantee contracts between the state and the private sector,” Rama said. “Based on the best international expertise, we will get the result of all issues the company has with the contract, the state and Albanian citizens; and the company will be held responsible for every issue.”
Prosecutors launch probe over suspension
The Fier Prosecutor’s Office has launched a probe into Bankers Petroleum after the national inspectorate announced it had suspended the company’s environmental permit a month ago and the company had illegally continued its activity.
Prosecutors are also investigating whether Bankers used inappropriate drilling methods and techniques.
The Environment Ministry said it had suspended Bankers’ activity since late February 2015 after the environment inspectorate identified violations in waste management, pollution of water resources also affecting agricultural products and social and health problems caused to local residents, a report unveiled only after the explosion incident.
The ministry said Bankers will have its suspension lifted only after it meets the environmental requirements.
Report blames company for incident
The Albanian Energy Ministry issued a report that said Bankers Petroleum had failed to use many of the tools available to stop the gas and water eruption that damaged many homes in the village of Marinze.
The report said Bankers had not used a backup plan in case of explosions and had not immediately applied the emergency plan after the incident.
Bankers said the explosion did not occur due to technical defects. It said they had immediately taken emergency steps and had stopped the eruption on the same day.
But the eruption also damaged about 70 homes of the farmers living in the area, and many sought medical care at the hospital, citing respiratory problems and other ill-effects from inhaling the gas.
Authorities have told the residents they will be compensated 100 percent for the damages.
However, the situation at the village of Marinze, continues to be tense with many people asking for medical care and many being frightened to return to their homes, many of which are seriously damaged.
Residents have voiced anger over incident with public officials who visited the area.
The residents had complained for years over the methods Bankers used in its drilling, including those resulting in mini-earthquakes that damage their houses.
Company has posted record profits in recent years
Canada-based Bankers Petroleum posted record high profits of around $129 million in 2014, more than double compared to 2013, on higher oil production despite a significant cut in international oil prices in the second half of the year. Meanwhile, royalties to the Albanian government and related entities were $86 million (15 percent of revenue) during 2014 compared to $94 million (17 percent of revenue) for 2013.
Bankers Petroleum 2015 prospects are less optimistic as international oil prices have more than halved to around $54 a barrel since their peak level in mid-2014, forcing the company to revise downward its 2015 program of investments and production.
In early February 2015, Bankers announced it had reduced its 2015 capital program to $153 million, down from a previously announced 2015 capital program of $218 million in early December 2014.
Bankers Petroleum, which has recently made it to the top 100 SEE biggest companies posted record profits of around 62 million dollars in 2013, almost double compared to the previous two years on higher production and oil prices, the company said in its 2013 financial results.
Since 2004, Bankers operates and has the full rights to develop the Patos-Marinza and Kuçova heavy oilfields under a 25-year concession contract with the Albanian government. The Patos-Marinza oilfield is the largest onshore oilfield in continental Europe, holding approximately 5.4 billion barrels of original oil in place. The Kuçova field has 297 million barrels of original-oil-in-place.
