Was oil really discovered in Shpirag?
For decades, a legend has suggested that the oil discovered in Albania to date is the tip of a much larger reservoir, which must be found somewhere much deeper underground. It is estimated that around 1.5 billion dollars have been poured to date in search of this resource, including hundreds of millions spent by Shell in the Shpirag area.
Albanian Prime Minister Edi Rama announced that the country is close to a great discovery, an oil field, which according to him, “will change the future of Albania” and, to a lesser extent, of Europe itself.
“The signs show that we may be close to a very, very important onshore discovery of gas and oil, which will not only greatly affect the future of our country, but will also play a role in the energy future of Europe, “ he declared.
The Minister of Infrastructure and Energy, Belinda Balluku added: “Shell has been working for some time in Albania and we are eagerly awaiting the result of the exploration, which will be a great discovery.”
Like Rama, Balluku admitted that the Shell company does not provide data and figures for what is expected, but despite this, she declared that “Albania will be a country that will produce a significant amount of oil and gas, 60% allocated to oil and 40% for gas.”
Of all these statements, the only thing that is a fact is that one of the international oil giants, the Dutch Shell, has been spending tens of millions of dollars drilling exploratory wells in the Shpirag area of Berat for years, hoping to find oil. . The company has not announced whether or not it has found usable oil, nor has it announced whether or not it has decided to invest to exploit the discovery it has made.
Shell is a company listed on the stock exchange and its statements are not made for internal political consumption in Albania, nor to supply a prime minister with political arguments. Therefore, as long as the company has not made a statement, the statements of Rama and Balluk should be considered as if they never happened.
If Shell has indeed found oil and decided to put it to work, then its announcement will go primarily to its shareholders and its stock price will change. But if oil is found, depending on the amount found and the ability to extract it, the discovery can provide tens of millions or hundreds of millions of dollars in profits per year for the company and for the state budget in Albania. In any case, it is unlikely that the discovery will be so big as to turn Albania into some kind of country like the Qatar of the sheikhs or Gaddafi’s Libya, while the amount of oil extracted will hardly have any role in the European energy supply. fossil.
In fact, the presence of oil in the area was first discovered by a drill by the Occidental Petroleum company in 2001. The well called Shpirag 1 was 5055 meters deep and despite finding oil, the company that drilled it abandoned the area after judging its development in vain.
Twelve years later, in 2013, a company called Petromanas drilled a second well and conducted tests. The second well was 5547 meters deep and the oil found was “light” ie quality oil, which fetches a higher price in the international market. Since then, Shell, which bought Manas’ interests in the project, has also drilled wells 3, 4 and 5. The company’s findings, as well as independent expert assessments of these findings, can be read on its website of the internet here.
The company in any case emphasizes that its findings are of a scientific nature and not necessarily economic. The economic evaluation has not been done yet.
On the other hand, Shpiragu is not the only oil bearing area that has been discovered in Albania during the last three decades. The National Agency of Natural Resources published a list of findings in 2019. Panajaja is another place where gas was discovered in 1996, while the presence of gas was also discovered later in the sea near Durrës. The Austrians of OMË and the Greeks of Hellenic Petroleum spent big money drilling in the south of Albania for years before coming to the conclusion that the oil found underground cannot be extracted.
“The equivalent of Val D’Agri”
Both Shell and its predecessor Manas, emphasize in their reports that the geological formation of Shpirag is “equivalent” to the oil-bearing area of Val D’Agri in Italy. Val D’Agri is located in the Salerno area of southern Italy and was discovered in 1989. It was brought on stream in 1996 and currently produces 100,000 barrels per day from 24 wells. This does not mean that the discovery in Albania will be like that, but if it is like that, then the exploitation company will have an income of about 10 million dollars a day and over 3.6 billion dollars a year, if we consider the current prices of oil. Albania currently produces about 20,000 barrels per day, and if this becomes a reality, the country’s production will increase sixfold.
Profits depend on corruption
On the other hand, the impact that such a discovery will have on the state budget will depend on the cost of oil production, while the latter, to a significant extent, will depend on the level of corruption of public authorities in Albania. . The formula for oil concessions in Albania is that the concession company undertakes to find and develop the resource at its own expense and if it finds something valuable, the net profits will be split 50% by 50% between the Albanian state and the concession company. To date, with such previous contracts, it has not gone well for us. The case of Bankers Petroleum is significant. Since receiving the concession of the Patos-Marinza field, the company has had a multi-year negative overall result, not declaring profits and not paying tax on the profit at the rate of 50%. Consequently, the benefits that Albania has from the extraction of oil in Patos-Marinze amount to approximately 15% of the total value of the extracted oil and this figure includes a tax that the central government keeps and other benefits from the economic footprint of the company, employed Albanians in it or other local expenses. A previous investigation by BIRN revealed that it is actually the Albanian authorities that proved unable to hold the company responsible for the non-transfer of profits, that is, that the profits made from oil in Albania are not transferred to other companies in the form of expenses peace
Whether this history will repeat itself with Shell or not, this cannot be predicted. But what is predicted is that the public authorities in Albania are unlikely to change immediately.
Curse of resources
For decades, political science experts have argued that for many countries, finding natural resources has not been so much a path to wealth as a disaster, a curse. Natural resources can generate valuable income to invest in a country’s development, but they are also a source of potential corruption of that country’s political leaders.
Albania is not a very rich country with natural resources, and yet, those natural resources it has have not been used until today in the service of development. Criminality in Fier and Bulqiza seems to be partially or totally fueled by the lucrative business created by the two few natural resources that Albania has, oil in Fier and chrome in Bulqiza. Chromium has also become a source of fiscal fraud with VAT, not only by not contributing to the state budget, but by eroding the taxes that citizens pay elsewhere.
Even the history of these sources is not very promising. In the years 1970-1980, when the price of oil on the international market was very high, the Albanian communist government had the opportunity to increase production to the maximum (up to 2.6 million tons in 1976) and apparently used this money to build bunkers, to execute and imprison oil engineers on the charge that they were not producing as much oil as the dictator wanted.
Basically, it should be borne in mind that only the oil field in Kučovo has produced 23 million barrels in its history, equivalent to 2.3 billion dollars at today’s oil prices. But what this money has left behind in Kuçovo is environmental pollution and nothing else.
The discovery of a new oil source in Albania does not necessarily mean that Albania will benefit. It can also be a curse./BIRN