Albania is the largest exporter of crude oil in the Energy
Community and is home to the largest onshore oil field in Europe
(i.e. Patos Marinza). A number of foreign investors have already
entered this market, yet regulation of the upstream sector is based
on old and not comprehensive legislation from 1993 (amended several
times), which does not reflect the latest development of the sector
related to exploration and production of hydrocarbons in
In respect to this oil and gas sector, regulatory and policy
developments have long been underway and discussed with relevant
stakeholders as part of the overall state energy strategy. However,
new amendments to the existing law no. 7746 / 1993 "On
Hydrocarbons" (exploration and production), as amended (the
"Hydrocarbons Law") have only been
adopted on 2 Feb 2017, striving to regulate the activity of
exploration and production of hydrocarbons in Albania.
The governmental objective introduced in these latest
amendments, is to negotiate the terms of the Petroleum Agreements
in the oil industry [the most common type of which used in Albania
is a Production Sharing Agreement
("PSA")] in a fair, transparent and
competitive manner, to protect Albanian natural resources (inland
and offshore) which are state owned, by guaranteeing the
country' national security, in line with the principles of
Directive 94/22/EC of the European Parliament and of the Council
"On the conditions for granting and using authorizations for
the prospection, exploration and production of hydrocarbons".
Based on this principles, the execution of new PSAs or share
transfers in existing Petroleum Agreements can be rejected by the
relevant authorities in case there is any indication of Albanian
national security infringement.
Whilst the right of explorations have remained unchanged, that
means that can be conducted for a period of 5 years (subject to
further extension up to the utmost period of 7 years), exclusive
rights to exploit hydrocarbons now can be extended up to 5 years in
maximum following the initial period of 25 years. Appraisal period
has been definitely separated from the exploration period.
New changes give the possibility to contractor to benefit from
fiscal stability clauses, up to 12 years from production of
hydrocarbons, by keeping tax liabilities at same level during the
12 years' period.
Along with the Natural Agency for Natural Resources
("AKBN") which was created back in 2006
to deal, inter alia, with hydrocarbon activities on behalf of the
Albanian state and operating as a specialized institution dealing
with the negotiations of the PSA, the monitoring of petroleum
activities and policy-making, the new legislative amendments aim to
establish a new authority in charge of all technical consultancy
services, scientifically speaking. The Scientific
Hydrocarbon Institute will be responsible for conducting
all studies, analysis, providing consultancy services and acting as
a technical opponent of proposed projects in this sector,
monitoring the implementation of relevant production sharing
agreements during the exploration and development of hydrocarbons
in Albania, on behalf of relevant state authorities (not only in
the hydrocarbon sector but also in relation to the refining,
transport and trade of hydrocarbons and its by-products). In light
of above changes, the competences of AKBN will be revisited and a
new agency responsible for hydrocarbons (currently operating as a
department of the AKBN) will be in charge of some of competences
performed currently by AKBN.
While this amendments have been introduced to facilitate
incoming foreign direct investment in the hydrocarbon sector, it
remains to be seen whether the new rules and newly established
structures will contribute to promote more exploration
opportunities in Albania during 2017.
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