Extractive Industries Transparency Initiative in Albania Report for the year 2015

172 Pages·2017·7.13 MB·English

by  Jonida Vesiu

Extractive Industries
Transparency Initiative in Albania
Report for the year 2015
December 2016 – First revision June 2017

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E xtractive Industries Transparency Initiative in Albania |

A country’s natural resources,
such as oil, gas, metals and
minerals, belong to its citizens.
Extraction of these resources can
lead to economic growth and
social development.

More openness and public
scrutiny of how wealth from a
country’s extractive sector is
used and managed is necessary
to ensure that natural resources
benefit all.

01
Deloitte Audit Albania sh.p.k
Rr. Elbasanit.
Pallati poshte Fakulteti
Gjeologji- Miniera
Tirana, Albania
Tel: [phone]
Fax: [phone]
www.deloitte.al

The Albanian Working Group
c/o Ministry of Energy and Industry
“Deshmoret e Kombit” Blvd.
Tirana, Albania

Report of factual findings - assembly and reconciliation of cash flows
We were engaged to perform the procedures agreed with you with regard to the reconciliation of cash flows
from the petroleum, mining and hydro-energy activities and compilation of the contextual information as
part of the implementation of the Extractive Industries Transparency Initiative (EITI) in Albania for the year
2015.
In performing our work we referred to the International Standard on Related Services (“ISRS“) 4400
“Engagements to perform agreed upon procedures regarding Financial Information” published by the
International Federation of Accountants (‘IFAC”).
Our procedures are listed in Chapter 9 of the report. Our findings are presented in Chapter 10 and in the
appendices as indicated in Chapter 9.
Because the agreed-upon procedures do not constitute either an audit or a review made in accordance with
International Standards on Auditing or International Standards on Review Engagements, we do not express
any assurance on the financial information provided in this report including payments reported by the
companies and government institutions. The information presented in our report, or information provided
by licensees or government institutions, has not been subject to control or verification procedures unless
otherwise stated in the report. Had we performed additional procedures, or had we performed an audit or
review in accordance with International Standards on Auditing or International Standards on Review
Engagements, other matters might have come to our attention that would have been reported.
The enclosed EITI report for 2015 consists of eleven chapters covering among other things contextual
information on the industry, description of the compilation, and reconciliation processes and related findings
as well as lessons learned during this year’s reconciliation and summarized recommendations.
Information presented in Chapters 1 to 7 and other information in addition to payment streams that were
subject to the reconciliation process and our procedures, is provided mainly by EITI Albania in collaboration
with the Ministry of Energy and Industry, National Agency of Natural Resources in Albania, Albpetrol, and
the Albanian Geological Survey. We did not carry audit or other testing procedures to validate the
completeness and accuracy of such information.
The objective of this report is to enhance transparency within the petroleum, mining, and hydro-energy
industry. Our procedures are not designed to identify fraud or misstatements made by licensees and
government bodies.

December 28, 2016
Tirana, Albania

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally
separate and independent entity. Please see http://www.deloitte.com/al/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its
member firms.

©2016 Deloitte Audit Albania
Content
Content 0
Executive Summary 5
1. Introduction 6
2. Overview of the extractive sector and hydro-energy sector in Albania 10
3. Oil and gas 20
4. Mining sector 39
5. Hydro-energy sector 55
6. Subnational transfers 74
7. Audit and disclosure requirements in Albania 76
8. Overview of flows reported and reporting entities 78
9. Approach, methodology and work done 82
10. Results of the reconciliation 87
11. Lessons learned and recommendations 95
Glossary and abbreviations 105
Appendix 1 – Disaggregated reconciliation from the oil and gas sector 107
Appendix 2 – Disaggregated reconciliation from the mining sector 111
Appendix 3 – Disaggregated reconciliation from the hydro-energy sector 130
Appendix 4 - Albpetrol’s operations and governance 135
Appendix 5 – List of Petroleum Agreements held by Albpetrol at 31 December 2015 139
Appendix 6– List of Petroleum Agreements held by AKBN at 31 December 2015 140
Appendix 7 – Current licensing situation and free exploration blocks 141
Appendix 8 – Mining licenses awarded in 2015 142
Appendix 9 – Register of concessions in the hydro-energy sector in December 2015 145
Appendix 10 – Content list providing link per each of the EITI standard clauses to the EITI
report 161
Appendix 11 – Correction to the initial reconciliation for the year 2015 165
Contacts 169

This report is revised from its initial publication. Please refer to
Appendix 11 for the detailed revisions.
Executive Summary
Promoting public awareness about how the
country manages oil, gas and mineral resources
Albania stands among 51 countries adhering to the Extractive Industry
Transparency Initiative (“EITI”), a global initiative which seeks to improve
the governance of the extractives sector globally.
As part of the ongoing implementation of EITI, the Albanian Government
publishes this informative report on the extraction of oil, gas and other
minerals and their contribution to the State budget and Albanian Economy.
The report provides an overview of activities in the upstream oil and gas
sector, mining sector and hydro-energy, and the reconciliation of main flows
paid by licensees and collected from the government agencies in these
sectors. Oil deposits, Bankers Petroleum Patos
Based on data reported by Government agencies, production value
Chart 1 -Production
generated during 2015 by these sectors is estimated at USD 953 million.
in USD million in 2015
The sectors’ collective known contribution was about 4.1% of the revenue
recorded in National Budget for 2015, however employee collectively less 500
than 1% of total employee workforce registered in the country in 2015, 398
400
based on AKBN statistics. 325
300
230
Crude oil comprised about 59% of the total output from the extractive
200
sector. About 89% of crude oil was extracted from Bankers Petroleum
operating the Patos-Marineza oilfields. Chapters 2 to 5 provide an overview
100
of regulatory and fiscal regime and exploration and production activities in
the three sectors. -
Reconciliation of the cash flows
The reconciliation and reporting according to the EITI standard covered all
companies operating an exploration license and production license in oil and

gas, 106 mining companies and 19 hydro-energy companies.
Chart 2 -Chash-flows
By the date of this Report cash flows were reconciled to 98% of total cash reconciled in Lek billion
flows reported from the licensees and the Government. Chapter 10 presents Licensees State
the reconciliation on an aggregated level. Company-by-company 35
30
reconciliation is presented in the appendices to the report.
25
20
Chart 2 on the right presents the trend of the cash flow reconciliation from 15
year 2011 to 2015. 10
5
0

2011 2012 2013 2014 2015
Source: EITI reports 2011 -2015
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Extractive Industries Transparency Initiative in Albania | 1. Introduction

Koman Lake, Koman
1. Introduction
This Report is the 6th Albanian Extractive
Industry Transparency Initiative Report and
covers the year ended 31 December 2015.
1.1 What is EITI?
The Extractive Industries Transparency Initiative (“EITI”) is a voluntary
international coalition of governments, extractive industry companies and
civil society organizations engaged in management and use of natural
resources, such as oil, gas and minerals (see also: www.eiti.org). EITI’s
final aims, is to promote transparency in order to prevent corruption as well
as provide citizens with a basis for demanding fair use of revenue.

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Extractive Industries Transparency Initiative in Albania | 1. Introduction

The transparency initiative is regulated through an international standard
that ensures more transparency around countries’ oil, gas and mineral
resources, the “EITI Standard”, which replaced the “EITI rules” on July
2013. Since then, the EITI standard was further amended in January 2015
and February 2016.
The EITI standard is developed and overseen by a coalition of governments,
companies and civil society. It is based on the belief that prudent use of
natural resources contributes to economic growth, sustainable development
and reduction of poverty in resource-rich countries.
Under this standard, companies declare what they pay and governments
declare what they receive. These payments are disclosed in an annual EITI
Report which shall be comprehensive and actively promoted to allow
citizens to see for themselves how much their government is receiving from
their country’s natural resources and demand for fair use of the revenue.
1.2 EITI in Albania
The Extractive Industries Transparency Initiative in Albania (ALBEITI,
www.albeiti.org) was established in 2009 by the Government of Albania.
The EITI Standard 2016
Albania joined EITI as a candidate in May 2009 and obtained the EITI
compliant status in May 2013. Since the initial candidature Albania has
published annual reports summarizing the activities and cash flows year on
year from 2009 to 2014. This report covers year 2015.
EITI implementation in Albania is overseen by the Albanian Multi-
stakeholder Group (“MSG” or the “Albanian Working Group”), regulated by
Public Order of the Prime Minister No. 71 dated 21 July 2011. The MSG is
composed of various EITI stakeholders including the Government,
extractive companies, civil society etc. and chaired by the Deputy Minister
of the Ministry of Energy and Industry. The the EITI Albania Secretariat
(“ALBEITI”) supports the MSG throughut the EITI implementation.

In December 2016, the Minister responsible for energy approved a new
regulation of the MSG via order no. 454 dated 30 December 2016. The Banja HPP, Devoll Hydropower
regulation sets role and operating principles, selection and performance of Gramsh
the members, etc. The regulation along with the updated list of the MSG
members is published in the ALBEITI website: www.albeiti.org.
1.3 Albanian Working Group
Government of Albania
1. Mr. Ilir Bejtja Chair, Deputy Minister of Energy and Industry
2. Mr. Dritan Spahiu Ministry of Energy and Industry
3. Mr. Sajmir Laçej, Ministry of Finance
4. Ms. Elda Spasse Ministry of Justice
5. Ms. Borjana Shaka General Directorate of Taxes
6. Mr. Nikoll Kaza Albanian Geological Survey
7. Mr. Azbi Arapi National Agency of Natural Resources

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Extractive Industries Transparency Initiative in Albania | 1. Introduction

Civil Society Organizations
8. Mr. Ilir Aliaj Centre for Development and Democratization of Institutions
9. Ms. Anila Hajnaj Albanian Centre for Development and Integration
10. Mr. Sami Neza Centre for Transparency and Free Information
11. Mr. Baki Bajraktari Syndicate of Miners in Bulqize
12. Waiting for the new member confirmation
Interest Groups
13. Mr. Adriatik Golemi Bankers Petroleum Albania Ltd
14. Mr. Saimir Boka Albchrome
15. Mr. Perparim Alikaj FIAA
16. Mr. Dritan Dervishaj Antea Cement
Permanent Members Contributors
17. Mr. Sokol Mati Beralb sh.a.
18. Mr. Mehmet Hasalami Ministry of Energy and Industry
19. Mr. Oltion Kuke Albanian Custom Administrate
20. Ms. Arjana Dyrmishi Albanian Custom Administrate
21. Ms. Jonida Kaza Ministry of Finance
22. Ms. Entela Muha Ministry of Justice
23. Ms. Laura Cela Bankers Petroleum Albania Ltd
24. Ms. Erjola Sadushi Albanian Energy Regulator
25. Ms. Raimonda Islamaj Albanian Energy Regulator
26. Mr. Bilal Koçi Albanian Geological Survey
27. Mr. Anda Beluli PETROMANAS Albania Gmbh
1.4 Annual reporting
According to the EITI Standard, licensees and the Government bodies shall
report payments made and revenues received annually and these shall be
reconciled by an independent administrator. In this context, the MSG and
ALBEITI requested the following parties to report all payments made to the
Albanian Government:
 all licensees operating in exploration of oil, gas, and mining;
 all licensees operating in production of oil and gas;
 the largest mineral producers;
 the largest hydro-power producers; and
 the largest investors in hydro-power plants in the pre-production phase.
Additionally, the MSG and ALBEITI requested recipient Government
institutions to report revenues received.
EITI Reporting in Albania for the mining and petroleum sector are regulated
respectively, through Law No.10304 “On the Mining sector in the Republic
of Albania”, dated 15 July 2010, amended and Law No. Law no.7746 “On
Petroleum (Exploration and Production)” dated 28 July 1993, amended.
These laws compel all mining and oil and gas companies to implement the
EITI. The Hydro-energy sector has voluntarily accepted EITI.
In accordance with the new EITI standard requirements, the contextual
information over the extractive and hydro-energy sector in Albania is
presented in chapter 2 of this report. For compiling of the contextual
information, the MSG and ALBEITI requested the industry regulators, and
fiscal Government agents to furnish ALBEITI with macroeconomic data,
production, exports, and revenue collected from the extractive industry.
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Extractive Industries Transparency Initiative in Albania | 1. Introduction

Independent Administrator
The MSG appointed Deloitte Audit Albania Sh.p.k (“Deloitte”) as
administrator according to a contract dated July 14, 2016. The
administrator’s role is to:
 Receive reporting from licensees and governmental agencies
 Compile the reporting and seek to resolve discrepancies to the extent
possible
 Prepare and publish a report comprising the reconciled payments and
revenues, any discrepancies, and other information relevant, to
understand the payments and revenues from the petroleum and mining
activity.
 Compile the contextual information in accordance with EITI report
requirement 3.
 Other information requested by MSG; and
 Provide recommendations for improving the process
1.5 Acknowledgements
We would like to express our sincere thanks to the Ministry of Energy and
Industry, the Albanian Working Group and to the Albanian EITI Secretariat,
who have assisted us in receiving timely replies from the Government and
participating companies.

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Extractive Industries Transparency Initiative in Albania | 2. Overview of the extractive
sector and hydro-energy sector in Albania

2. Overview of the
extractive sector and
hydro-energy sector in
Albania
Albania is rich with energy resources: oil, gas,
coal, wood, bitumen, and hydro-energy
potential, etc., which contribute in different ways
to meet energy demands in the country.
2.1 Key facts
2.1.1 Energy and resources in Albania
Energy and resources sector in Albania is dominated by the: Chart 3 – Contribution of Energy &
resources to GDP
 petroleum sector, (at current prices)
 hydro-energy sector and
2015 5.6%
 Mining sector.
Based on preliminary results published by INSTAT, the Energy and 2014 6.8%
resources sector accounted for 5.6% of the gross domestic product in 2015.
2013 7.0%
Oil and mining sector together account for a share at 3% of the GDP, while
the power sector comprised about 2.6% of the GDP. 2012 6.2%
Exports from the extractive sector have increased substantially by over 2011 5.3%
100% up to 2013, when reached Lek 96.7 billion or 39% of total exports.
0% 50% 100% 150%
This share dropped to 24% of total exports in 2015 or Lek 57.9 billion
(chart 4). GDP Energy and Resources in % to GDP
Source: INSTAT-Annual National Accounts
Oil and gas (production approach)
Crude oil comprised the primary source of energy produced in Albania.
Chart 4 – Exports from
Crude oil extracted in 2015 acounted for 60% of domestic energy from
extractive sector vs. total
primary sources followed by the power sector with about 24% of energy
exports
produced from primary sources in 2015. Lek billions
400.0 39% 32% 24%
In 2015, oil and gas sector counted five companies extracting crude oil in
25%
the southern part of Albania and four companies engaged in exploration 300.0 19%
activities. The State partecipated in the upsteam oil sector through direct
200.0
ownership of Albpetrol, engaged in exploration, development and
production of oil and gas. Albpetrol holds shares as a primary licensee in all 100.0
oil fields discovered up to 1993. In order to pursue efficient operations,
-
Albpetrol sub-granted its rights to private oil companies. Production of
2011 2012 2013 2014 2015
crude oil has more than doubled since 2003, when private oil companies
Source:Albanian Custom
started operating in the sector.
Administrate
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