Albania’s current dependance on hydropower

Albania, with a population of around 2.85 million, is almost entirely dependent on hydropower for its electricity supply. This gives it an advantage in decarbonising its electricity sector but also makes it highly vulnerable to the changing climate. Massively fluctuating hydropower generation means that despite the addition of hundreds of MW in new plants in recent years, the country has to import electricity most year

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Albania is the only country in the Western Balkans to have completed new large hydropower plants in the last decade and as of the end of 2021 it had at least 25 operational hydropower plants of more than 10 MW, as well as countless smaller ones. Even for the larger plants, financing is often impossible to trace, but known sources include the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), Raiffeisen and other commercial banks.

Despite its over-dependence on hydropower, Albania still plans to build the Skavica hydropower plant, potentially with financing from the United States Development Finance Corporation.

Albania’s oil and gas sector

Albania is one of the few Balkan countries producing oil. The state-owned Albpetrol is active in the development, production and trade of crude oil, while the largest oil producer is Bankers Petroleum, previously supported by the EBRD and the IFC, and now Chinese-owned.

AlbPetrol estimates that Albania has recoverable oil reserves of around 120 million barrels, and natural gas reserves of 5.7 billion cubic metres of gas. Patos-Marinza is one of continental Europe’s largest oilfields, and onshore and offshore oil and gas opportunities have attracted dozens of international companies to Albania over the years. Since 1992, dozens of new onshore wells have been drilled and thousands of new 2D, and some 3D, seismic profiles have been completed, onshore and offshore.

Companies that currently hold production-sharing agreements with AlbPetrol include:

• Patos-Marinza – Bankers Petroleum (2004);
• Kuçova – Sherwood International Petroleum/Bankers Petroleum (2007);
• Visoka – Transoil Group (2009);
• Ballsh Hekal – Anio Oil and Gas (2007);
• Finiq-Krane and Pekisht-Murriz – Fin-Pek Petroleum (2013);
• Divjake, Ballaj-Kryevidh, Povelce, Panaja, Finiq-Karne, and Frakull – AlbPetrol Delvina – Delvina Gas Company (2016);
• Cakran-Mollaj, Gorisht – Kocul, and Amonica – Transoil Group (2018).

Shell Upstream Albania operates in Blocks 2 and 3, where the company is currently assessing the commercial viability of its discovery of oil and gas. In 2018, Shell also signed an agreement for Block 4. In Spring 2019, Shell announced that initial tests on the Shpirag-4 appraisal well near Berat confirmed the flow potential of a significant light oil discovery. Shell has drilled 4 different oil wells to date and plans to continue for at least 2 more years in the appraisal stage.

In 2022, Albanian Prime Minister Edi Rama highlighted that Shell was on the verge of discovering major gas and oil reserves in Albania, mentioning that this was a development that has the potential to change the energy future of Europe.

In December 2019, Eni signed an exploration agreement for the onshore Dumrea Block. Onshore blocks 1, 6, 7, 8, A, B, C, D, E, and Panaja are vacant, and all offshore blocks are vacant.

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Refining and oil imports & exports

Albania has 2 aging refineries at Ballsh and Fier with refining capacity of 1 million metric tons and 0.5 million metric tons, respectively. In 2017, a third refinery began operations near Elbasan with an annual refining capacity of 250,000 metric tons.

Albania exports much of its crude oil and imports most of its refined fuel. In 2020, imports under chapter 27 suffered significantly from the COVID-19 related economic disruption and dropped to just USD $500 million, a 28% reduction compared to the previous year.

Albania also has 2 coastal oil and gas terminals: Porto Romano in Durres, and Petrolifera in Vlora. Each has capacity to store liquid petroleum gas, crude oil, diesel, gas, and additional liquids and dry products.

Developing a gas sector

Albania is not connected to international gas networks at the moment, though the Trans-Adriatic Pipeline (TAP) has been built on its territory. The country also produces a small amount of gas, mostly used in oil production and the refining industry. It also has an outdated pipeline network of 498 kilometres, which at the moment is mostly not operational.

Albania also plans to develop a gas sector, despite having signed onto the Sofia Declaration on the Green Agenda for the Western Balkans and thus pledging to decarbonise by 2050. In March 2021, United States companies Excelerate Energy and ExxonMobil signed a Memorandum of Understanding (MoU) with the Albanian government to conduct a feasibility study for the potential development of a liquefied natural gas project in Vlora, consisting of an LNG import terminal, conversion or expansion of the existing Vlora thermal power plant, and establishing small scale LNG distribution.

In March 2021, the Albanian gas operator Albgaz signed an MoU with the Italian SNAM for the development of the underground natural gas storage project in the Dumre area. This project aims to store up to 800 million cubic metres of natural gas based on an expected investment of USD $170 million.

Producing oil and gas projects

Patos-Marinza oilfield

The Patos-Marinza conventional oil field recovered 88.15% of its total recoverable reserves, with peak production in 2014. The peak production was approximately 24.32 thousand barrels per day of crude oil and condensate. Based on economic assumptions, production will continue until the field reaches its economic limit in 2034. The field currently accounts for approximately 88% of the country’s daily output.

Kuçova oil field

The Kuçova oil field was discovered in 1928, started production in 2004, and is the country’s second biggest onshore oil field. The field has proven reserves of about 490 million barrels.

Operational and planned/proposed LNG projects

Trans Adriatic Pipeline (TAP)

TAP is a natural gas pipeline proposed in 2003, constructed in 2016, and operational since 2020, stretching from Azerbaijan at the Caspian Sea to Europe from Greece through Albania and the Adriatic Sea to Italy. It is a European section of the Southern Gas Corridor; as of 2022 capacity is 10 billion cubic metres of gas per year.

Ionian Adriatic Pipeline

Plans are also in place to expand the Southern Gas Corridor to include additional connectors, including the planned Ionian Adriatic pipeline (IAP). The IAP, which would connect to TAP near the Albanian city of Fier, would carry up to 5 billion cubic metres of gas to Montenegro, Croatia, and Bosnia and Herzegovina.

Albania also has a 98MW gas/oil fired power plant at Vlora, financed by the World Bank, EBRD, and the European Investment Bank (EIB), which unfortunately has never operated due to technical faults. Nevertheless, plans exist to convert it to gas and start operating it.

Current oil and gas opportunities

Existing oil production operations, and current and new oil and gas exploration licenses, both onshore and offshore, may represent opportunities to international oil and gas companies and affiliated oil and gas service providers. The TAP may offer opportunities for salt-dome gas storage, thermal energy generation, and the construction of downstream gas infrastructure and interconnectors.

Renewable energy potentials of Albania

Under the Energy Community Treaty, Albania committed to increase the share of renewable energy to 38% of gross final energy consumption by 2020. In reality it managed 45%. This was mainly due to hydropower and the use of wood biomass in some households.

Until 2017 Albania only offered renewable energy incentives for hydropower and as a result solar PV and wind have remained underdeveloped, with only 23MW of solar installed by the end of 2021, though plenty of plans exist.

Albania has promising potential for wind and solar, but as with all the countries in the region, different sources put the exact figures at quite different levels, depending among other things on whether they use sustainability criteria. In 2020 the International Renewable Energy Agency (IRENA) set solar PV potential at 1074MW, and wind potential at 616MW. On the other hand, the REmap 2030 scenario sets solar PV potential at 1697GWh and wind potential at 1794GWh.

According to the International Energy Agency (IEA), Albania’s Ministry of Energy recently launched an auction round for the construction of the country’s first large-scale solar plant. The country also has a National Strategy of Energy, which aims to develop an effective energy sector that guarantees security of energy supply and efficient use of energy.

Solar and wind projects currently under construction

Karavasta Solar Park

The project consists of a grid-connected solar PV plant with an installed capacity of 140MW. Voltalia is responsible for its design, financing, construction, operation and maintenance.

Spitalle Solar Park

Voltalia’s USD $166.57 million Spitalla Solar Park has an installed capacity of 100MW. The project is currently in the permitting stage, and will be developed in a single phase. The project is expected to enter into commercial operation in 2023.

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