TIRANA, Feb. 23 – The slump in oil prices and their slow recovery is delaying contract negotiations with the Royal Dutch Shell and a subsidiary of Israeli-based Delek Group, over two oil exploration blocks they won in an international tender back in mid-2015, say energy ministry officials.
Back in August 2015, Albania selected Dutch giant Shell and its Canada-based partner Petromanas whose minority stake was fully acquired by Shell later in early 2016 as winners to explore the onshore Block 4 in south-eastern Albania spanning approximately 874 square miles close to their current drilling site at Shpirag, Berat.
Meanwhile, Navitas Petroleum, a subsidiary of Israeli-based Delek Group was announced the winner of Dumre block in central Albania.
Dritan Spahiu, the head of the Oil Development and Policies department at the energy ministry, says contract negotiations are on track to conclude with Shell but have somewhat stagnated with the Israeli company.
“Considering the drop in international oil prices, we can now confirm that there is a stagnation. We are continuing negotiations with Shell, there are still some issues that are being examined. Negotiations are still going on with Navitas, part of Delek Group, but the companies are carefully examining the situation. I think one of these two deals is on track to be signed soon,” Spahiu told a TV interview this week.
Meanwhile, junior Canadian company Penine Petroleum, recently reached a deal with Albania’s state-owned Albpetrol oil company on the exploration and development of the Velca Block, southern Albania.
The production sharing agreement is a 6-year exploratory lease, convertible to a 25-year production lease upon discovery of oil or natural gas accumulations.
Three other onshore blocks, Panaja, C and 5 have failed to attract investor interest while tender procedures have been cancelled on the exploration of the Joni (Ionian) 5 offshore block in southern Albania which overlaps with Greece until the maritime border dispute is settled with the neighboring country.
Albania currently has 13 free onshore and offshore oil and gas block which are scheduled for concession deals.
Foreign investors engaged in oil and gas exploration in Albania are exempted from the 20 percent VAT, can have their exploration stage extended from 5 to 7 years and engage in production from 25 to 30 years. Studies show Albania’s oil and gas reserves are estimated at 400 million tonnes, of which around 10 percent easily extractable.
The slump in commodity prices since mid-2014 has severely affected Albania’s oil and mining industry, producing the country’s second largest exports, paralyzing investment and cutting staff with a negative impact on the country’s economy.
The 2017 oil and mining prospects seem more optimistic as commodity prices are picking up.
Bankers Petroleum, recently acquired by China’s Geo Jade €392 mln after a decade of operations as a Canada-based company in Albania, is the country’s biggest oil producer developing Patos-Marinza, the largest onshore oilfield in continental Europe situated in southwestern Albania.
