History of Oil in Albania

Oil was first discovered in Albania in 1918 at Drashovice. In 1928, the Patos Marinze oil field was discovered, containing a reported one billion barrels of 8o to 10o API oil, which would make it one of the largest onshore oil fields in Europe (currently owned and operated by Bankers Petroleum Ltd.). According to the World Bank, 4,666 oil wells have been drilled, of which 3,123 wells are operating and 981 wells are shut in or abandoned in the country. Of the 500 gas wells drilled in the country, only 255 have produced gas. Albania’s oil production peaked in 1975 and then declined until 1982 when a more rapid decline began due to lack of funding for field development and technical expertise.

Current oil production is in the order of 8,000 bopd from six fields. Natural gas production is reported to have declined from about 21 MMcf/d in 1990 to about eight MMcf/d in 2001, believed to be driven mainly by lack of local demand. Current gas production is in the order of 500 Mcf/d from two fields. Approximately 80% of the oil production is heavy and, historically, the low recovery from these fields was primarily addressed by drilling on smaller and smaller spacing. As a result, field rehabilitation opportunities have been recognized in Albania but it has only been since 1991, when the country began the transition to an open-market economy, that foreign investment in the oil fields been permitted.

Until 1989, Albania was a net exporter of petroleum products but, by 2001, it was importing almost 75% of its needs. In the 1990s, efforts were made to attract foreign capital and technology, offering access to offshore acreage, followed by two onshore licensing rounds. In 1990, contracts were taken up on offshore blocks by international companies, including Deminex, Chevron, Occidental, Hamikon and AGIP.

In 1993, legislation opened up onshore concessions and the first international onshore licensing round in 1992 offered access to seven onshore fields. In November 1994, a foreign investment law was enacted to attract and protect foreign investment, guard against nationalization or expropriation of assets and allow funds to be freely transferred in and out of the country. In 1995, Albpetrol entered into a joint venture with Fountain Oil and CanArgo Energy to redevelop the Gorisht-Kocul oil field. As operator, Fountain was charged with finding financing for field redevelopment and providing EOR equipment. The field was reported to be producing about 1,200 b/d from 160 wells in 1995 and remaining reserves were reported to exceed 22 million barrels. Start-up was slated for early 1996. The second onshore licensing round in November 1995 was attended by 30 oil companies. The offerings were two onshore blocks not awarded in the first licensing round, eight new onshore blocks and one block in the Adriatic Sea. Bids were received in mid-1996. Civil unrest in early 1997 alarmed international investors, but elections in June 1997 and a referendum in November, 1998 established Albania’s current constitution.

In the last decade Albania has evolved into a stable parliamentary democracy in a modern free market economy with a regulatory environment structured to attract foreign investment.