How to improve perception in Albania’s petroleum industry

Tirana, January 12, 2018

 

Article by Dael Dervishi, Partner, Optima Legal & Financial

 

Albania is a country rich in oil but the country is not benefiting as it should from its upstream hydrocarbons. International investors do not consider Albania an attractive regulatory environment to operate in. Without an improvement in the regulatory framework, it is unlikely that a long-lasting increase in investment in exploration and production will materialize.

 

There is a critical need to reform the upstream petroleum sector and to change the culture on which it is based.

 

Here’s a quick recap of the steps that should be taken to accomplish the real change in one of the most important sectors of the Albanian economy, laid out in a summarized bulleted list.

 

Hydrocarbon concessions are run almost unilaterally from the oil companies in Albania. Government agencies’ technical capabilities are extremely weak. This profound lack of equilibrium produces unnecessary and endless disputes between the parties.

 

  1. The Government must be urged to design new transparent bidding procedures for the new oilfields. Currently, there is no clear methodology and the companies that would operate the Albanian oilfields are selected arbitrarily. The process is characterized by lack of transparency, subjectivity and the applications cannot be submitted through an electronic method.
  2. The Government must be pushed to improve the regulatory quality and credibility to attract foreign investment. This can be achieved by transforming the hydrocarbons unit of the existing natural resource regulatory agency, into a strong and effective petroleum regulatory agency modeled on the ones existing in Norway, Brazil, and Colombia. The key is to have a stable group of well-trained and well-paid technical experts that can design (but not approve) and implement long-term oil policy. The objective is to create a stable and credible regulatory environment that guarantees the rights of investors. Currently, there are no competitive procedures in place for the selection of the head of the regulatory, neither there is any valid competitive procedure for the employees of this entity.
  3. The Government must establish a new practice of online reporting from the oil companies of their daily oil and gas production. This updated information would be automatically available to the public through the website of the Ministry of Infrastructure and Energy. The use of technology will allow the data to be open. Policy analysis and journalism would make energy governance more accountable and transparent to all. Government transparency cannot be achieved without the citizens’ participation. The technology will enable more complete, equitable and effective democratic participation. The overarching goal will be to achieve changes in the law to require real-time, online transparency for all energy information, including production and consumption of Petroleum; Natural Gas; Minerals; Renewables; Electricity.

 

The perception of foreign investors about Albania can change by promoting transparency in the governance of the natural resources; establishing an independent and credible regulatory authority for the sector and opening the market and limiting the governance, to fight cronyism and corruption.

 

Tirana, January 12, 2018

 

Article by Dael Dervishi, Partner, Optima Legal & Financial

 

 

 

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