Albania Upstream (Oil and Gas) Fiscal and Regulatory Guide

Albania offers production sharing agreements for upstream petroleum operations. Several onshore acreages have been offered during the last few years, including Block B and E in 2021. Albania has capitalised effectively the interest for its upstream oil and gas sector by awarding three onshore blocks to Shell and one block to Eni between 2018-2019. A new Petroleum Fiscal Law has entered into force on February 2, 2021, which imposes an 85% limit on tax deductions and therefore a minimum level of tax. The law also includes ambiguous terminology regarding fiscal stability provisions for existing PSAs, which could create uncertainty for existing investors in the petroleum sector. The fiscal terms introduced by Albania over the last few years are less favourable compared to regional peers, which may discourage investments in the future. The government is currently investigating ways to benefit from the Trans Adriatic Pipeline and an LNG import terminal that could potentially be developed by ExxonMobil and Excelerate.

“Albania Upstream (Oil and Gas) Fiscal and Regulatory Guide”, presents the essential information relating to the terms which govern investment into Albania’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Albania’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Albania

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Albania

Reasons to buy

Understand the complex regulations and contractual requirements applicable to Albania’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

Table of Contents

1. Executive Summary

1.1 Regime Overview – Production Sharing Agreements

1.2 Timeline

2. State Take Assessment

3. Key Fiscal Terms

3.1 Royalties, Bonuses, and Fees

3.2 Cost Recovery

3.3 Profit Oil

3.4 Direct Taxation

3.5 Indirect Taxation

4. Regulation and Licensing

4.1 Legal Framework

4.2 Institutional Framework

4.3 Licensing Process

5. Appendix

5.1 References

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List of Tables

List of Tables

Table 1: Regime Overview

Table 2: Albania, Key Events Since Year 2000

Table 3: Albania, Signature bonus (US$), Selected PSAs

Table 4: Albania, Production Bonus (US$), Various PSAs

Table 5: Albania, Government allocation (%), Dumrea Block PSA (2019)

Table 6: Albania, Government allocation (%), Block 2-3 PSA (2019) and Block 4 PSA (2018)

Table 7: Albania, Albpetrol share (%), Cakran-Mollaj & Gorisht-Kocul Contracts (2007)

Table 8: Albania, Cost Recovery Limits Applied Under Various PSAs (%)

Table 9: Albania, Profit share (%), 2021 Block B and E Bid Invitation, and Dumrea Block PSA (2019)

Table 10: Albania, Profit share (%), Block 2-3 PSA and Block 4 PSA, Shell, 2019 and 2018 respectively

Table 11: Albania, Profit Tax (%) where Albpetrol holds >50% interest in a project

Table 12: Albania, PSA, Work and Financial Obligations, Block 2-3, Shell, 2019

Table 13: References

List of Figures

List of Figures

Figure 1: Regime Flow Chart

Figure 2: Albania, Indicative NPV10/boe, IRR and State Take Comparison, and Price and Cost Sensitivity Analysis

Figure 3: Albania, Legal Framework

Figure 4: Albania, Institutional Framework

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