Don’t overlook Albania
Competition for quality new venture opportunities will continue to increase, as companies navigate through the political and economic changes occurring throughout the world. Companies will, therefore, need to manage their portfolios and adjust their screening criteria to better mitigate the risks associated with such changes. For some companies, this may mean divesting assets from countries that were once considered core to their businesses. For others, it may mean considering entry into countries that were once persona non grata, but which now possess political, business and security risks that are acceptable.
One such nation that will likely gain additional attention from our industry is Albania, which is where I have been working as country manager for TransAtlantic Petroleum since leaving Iraq some two years ago. Having a footprint and shape that are similar to New Jersey, and a population of about 2.7 million, it may surprise some people that this relatively obscure country holds the largest onshore oil field in all of Europe, and likely the largest onshore conventional gas field on the continent. This advisor page provides some personal insight as to why a country that is best known for its Communist past, and the struggles that followed, should now deserve greater attention as we move through 2017.
Why the obscurity? Albania emerged from the shadows of Communism in 1992, amid an economic collapse and social unrest following the death of dictator Enver Hoxha, who ruled for four decades. Under the iron-clad secrecy of this Communist state, the world had very little insight into the potential of the country’s 12 oil fields. Even today, the original reports, along with hand-drawn well diagrams, maps and cross-sections remaining from that period, fail to provide sufficient insight into Albania’s true hydrocarbon potential.
The incomplete data are not only the result of the technology and storage facilities available in that era, they also reflect the cautionary practices followed by early Albanian engineers and geoscientists. As told to me by elder staff, who continue to work in the fields, engineers under Hoxha’s rule had to truly stand behind their work, as the drilling of dry holes resulted in a six-month prison sentence, to allow these individuals to reflect on the errors that were made. The penalty proved even more severe for some of the country’s most respected geologists, whose lives ended within Communist prisons, because they were accused of not finding a sufficient number of new oil fields.
Why there is more. Albania lies within a tectonically active and structurally complex geologic region, associated with thrust faulting along the Adriatico-Apuilian plate boundary. The magnitude of these thrust faults produces the majestic mountains that exist throughout the Balkans. As these thrusts accrete over one another, many of the known oil fields were found within structures directly beneath the tops of these mountains. Using little more than surface mapping and the drill bit, 10 fields were discovered under Hoxha’s rule between 1960 and 1980. Without understanding Albanian history, it seems implausible that this country, which holds Europe’s largest onshore oil and gas field, has not had a meaningful discovery since 1980. This, however, is likely to change soon!
The modernized capital city of Tirana camouflages the country’s continuing struggle to overcome its isolation from the many advancements in technologies and living conveniences that became commonplace to the rest of Europe since the time of this last discovery. A visit to the fields and surrounding rural communities, however, shows the real magnitude of this struggle, as operations in many fields still rely on the same Chinese- and Russian-built vehicles, pumps and facilities that were put into operation over 50 years ago.
Many families living in communities around these fields care for their crops and olive groves meticulously by utilizing work animals and hand tools, as was done by generations of relatives that preceded them. And on the roads where private cars were outlawed until 1992, traffic consists of a mixture of cars, scooters, trucks and horse-drawn carts. Albania’s dichotomy of having Europe’s largest known onshore hydrocarbon accumulations, while also having extremely low utilization of modern E&P technologies, creates a unique opportunity.
Making progress. The Albanian government has been taking steps to help attract investments by international E&P companies. Such efforts have resulted in Albania becoming an active NATO member in 2009 and an EU candidate country in 2014. As evidenced in August of this year, their efforts continue. Under the watchful eyes of the U.S. ambassador and the EU, the Albanian parliament voted unanimously to institute judicial reform.
Today, eight companies have 18 Petroleum Agreements to operate onshore and offshore licenses. New investments in development operations have resulted in a tripling of the country’s heavy oil production from 0.42 million tons in 2004 to nearly 1.3 million tons by the end of 2015. Exploration activities also are increasing significantly, both onshore and offshore, as operators utilize modern seismic programs to help image subsurface complexities. Shell Oil remains the only major operating company in Albania, and is reported to have spent over $200 million to evaluate a potentially significant, light oil discovery in the onshore Shpirag area.
Room for improvement. The government can do more to motivate companies to invest in the technology needed to determine the country’s true hydrocarbon potential. Since Albania just approved judicial system reform, I believe the government also can reform its energy policy and incorporate use of a traditional, royalty-based Production Sharing Agreement. This will provide the government with a guaranteed revenue stream from all production, and will incentivize operators to make these needed capital investments by including proper cost recovery provisions.
Perhaps, with a bit more time and a bit more governmental support, our industry may finally devote the attention and needed investments to see what truly lies beneath the beauty of Albania’s landscape. Then again, an announcement of a significant oil discovery by Shell may accelerate this process entirely. 
