* Albania bidding to fulfil century-old oil hopes
* Sector dominated by small players
* Shell-partnered drilling well could hit big
* Concerns over transparency, corruption
By Matt Robinson and Benet Koleka
BERAT, Albania, June 20 In 35 years drilling for
oil around the world, Leo Aubin says he's made a lot of money
for a lot of people. Now the stout, moustachioed Canadian finds
himself in Albania, boring a hole 6,000 metres deep for the
black gold that the impoverished Balkan country has spent 100
"We're very confident we're going to find what we're looking
for," Aubin said at his drill rig, Shpirag II, in south-central
Petromanas, the small Canadian firm Aubin works for,
has picked up where a string of oil majors left off in the early
1990s, when the likes of Shell, Chevron and
Occidental rushed to Albania as its borders flew open
with the collapse of Communism.
They had hoped to emulate the discovery almost a century ago
by Anglo-Persian Oil Company, forerunner to BP, of one of
Europe's biggest onshore oilfields, Patos-Marinza.
Back then, an Anglo-Persian Oil director is said to have
declared Saudi Arabia "devoid of all prospects for oil" and that
the real play was in Albania.
History proved him wrong, but the quest to fulfil Albania's
oil promise continues.
Occidental drilled Shpirag 1 in 2001, a short distance from
Aubin's well, before heading for the exit with the other majors,
scared off by Albania's breakneck and sometimes violent first
dalliance with capitalism and doubts over the commercial return
on its reserves of heavy oil.
Teaming up with Shell, Petromanas has pinned its hopes on
the same geological profile as southern Italy, across the
Adriatic, where Eni and Shell are pumping 85,000
barrels per day from the 500-million-barrel Val d'Agri field.
After investing almost $300 million, Petromanas expects to
announce its exploration results by September, potentially
providing a huge boost for the Albanian economy and placing the
country of 3.2 million people alongside Romania in the top tier
of Balkan oil producers.
"Even if it's half of Val d'Agri, we're talking about more
than doubling the current production of the country," said Glenn
McNamara, chief executive officer of Petromanas.
"We know the oil's there," he told Reuters. "The risk is
commercial rates. Can the reservoir deliver the rates we need to
deliver a return on this investment?"
Shell's involvement reflects a revival of interest among oil
and gas majors for European exploration, particularly in the
likes of Poland and Ukraine.
Albanian officials say the country has around 220 million
barrels of 'proven and probable' oil reserves. They also expect
a big oil and gas player to 'farm in' on London-listed San Leon
Energy PLC's offshore exploration of Albania's Adriatic
shelf, which could yield significant gas reserves.
"Compared to well-established oil provinces, the opportunity
is much less, but there is a lot of growth potential for
companies willing to take risks," said Ivan Yakimov, an analyst
at the Sofia-based New Europe Corporate Advisory Ltd.
"If investors come with know-how, they can scale up
production and increase recovery rates," he told Reuters.
Facing a tight-run election on Sunday, the country's fiery
prime minister, Sali Berisha, says Albania is on the cusp of
realising its potential. "Albania should be taken seriously in
terms of its oil resources," he told an energy conference in the
capital Tirana last month.
Ordinary Albanians have heard it all before and yet the
country remains one of the poorest in Europe, the average wage a
meagre 369 euros per month before tax.
Albania stirred interest with its low royalty rates and
production-sharing agreements that McNamara described as "world
class", but a number of disputes over exploration licences has
hurt the investment climate in a country where corruption runs
rife and politics often comes down to patronage and muscle.
The government's decision to cancel an agreement with
U.S.-based Sky Petroleum in late 2011 raised eyebrows,
though Albania won the case when the company took it to
arbitration. Last year, Canada's Empire Mining halted operations
in Albania after its concession area was suddenly halved.
In February, after accepting what oil sector professionals
considered a vastly overvalued bid from a little-known
Albanian-U.S. firm for state-owned Albpetrol, the government had
to scrap it when the bidder couldn't make an initial payment.
Czech power group CEZ launched arbitration
proceedings last month against Albania after the country's power
regulator revoked the distribution licence of CEZ's local unit
in a dispute over prices and imports.
Observers say the country's Economy, Trade and Energy
Ministry, which handles mining and oil contracts, was run as a
fief by the junior partner in Berisha's coalition government,
the leftist Socialist Integration Movement (SIM), before the
party jumped ship in April ahead of the June 23 election.
Florion Mima, a Berisha ally who took over at the ministry
until the polls, told Reuters he was too busy with a mountain of
paperwork that included 47 disputed mining licences to be
interviewed. He did not respond to emailed questions.
Kastriot Bejtaj, an Albanian oil expert and former manager
of Albpetrol, said the state's management of the sector was at
best ad hoc and had left exploration rights in the hands of a
number of small companies with little history in major oil
discoveries or the deep pockets to invest.
"If there's a strategy, it's not clear," he complained.
"We're losing time. We're losing time in exploration and
The problems echo those of European Union-member Poland,
where foreign players interested in the country's promised shale
gas riches have been unnerved by an uncertain legal and
regulatory framework, red tape and environmental regulation.
Warsaw had high hopes of becoming a major source of shale
gas for Europe and attracted the likes of Chevron and ExxonMobil
to some of the 100 exploration licences it issued.
But Exxon, along with Canada's Talisman Energy and
U.S. oil firm Marathon, quit after the country scaled down its
gas reserve estimates and early drilling proved challenging.
Professor Stavri Dhima, head of the petroleum regulatory and
management sector at the Ministry of Economy, Trade and Energy,
denied Albania had lost time. In his ground-floor office, a mess
of maps, surveys and binders, he urged patience.
"An oil explorer is like a hunter," he said. "He knows that
in this region there are wild animals, but he doesn't kill one