Albania publishes EITI Report 2012

Background

EITI Albania, as part of the global Extractive Industries Transparency Initiative network and on behalf of the Albanian Government has published Albania’s 4-th EITI report on the extraction of oil, gas and mining contribution of this industry to the State budget as well as allocation and spending of these revenues with the final aim of promoting the transparency in order to prevent corruption, and raising awareness among citizens in order to demand for their Government the proper use of the fiscal and non-fiscal income generated from the exploration and exploitation of natural resources in Albania.

The Report is assembled by an Independent Administrator, represented for the second consecutive year by the Deloitte Albania. This is the second report for Albania issued according the new EITI Standard.

  1. Overview of the extractive industry

AKBN reported total production of oil, gas and mining at the amount of Lek 65.8 billion in year 2012 and Lek 70.7 billion in year 2011.

Oil and gas comprised 76% of the total extractive sector production in 2012 and 68% in 2011.

Approximately 85% of total oil produced was extracted from the Patos-Marinza oilfields

Production of chromium comprised approximately 62% of total mining production in 2012 and 66% in 2011.

About 58% of chromium produced in year 2012 and 70% of chromium produced in 2011 was extracted from the district of Bulqiza.

Based on data reported from INSTAT, production of oil, gas and mining represented about 5.6% of GDP in 2012 and 4.3% of GDP in 2011.

Contribution of the extractive industry to total employment in the country is almost insignificant. AKBN reports that companies licensed in oil, gas and mining sector employee less than 1% of total employees in the country.

Figure 1 – Cash flows from the extractive industry

eiti report 2012 figure 1

Figure 1 above presents an overview of the cash flows generated from the extractive industry and their allocation between the State Budget and Albpetrol.

Revenue generated from the extractive industry (from oil production, royalty, profit tax, and signature bonuses) amounts to Lek 11,860 million in total. This revenue includes oil production and bonuses amounting to Lek 5,415 million collected by Albpetrol for production licenses under its administration. As a licensee, Albpetrol paid to the State budget royalty, profit tax, and dividend amounting to Lek 1,901 million.

Payments amounting to Lek 8,396 million or 70% of total cash flows from the extractive industry are recorded in the State budget. These payments contribute to 2.5% of the total revenue in the State budget in 2012 (2011: 1.8%). The largest share is derived from the oil and gas sector, comprising Lek 5,180 million or 62%, followed by the Albeptrol and the mining sector contributing with 23% and 15%, respectively.

Payments made to Albpetrol from the oil, and gas licenses for the share of oil production and bonuses in accordance with the petroleum agreement were Lek 5.4 billion in 2012 (2011: Lek 3.5 billion).

Revenues from the royalty. According to the Ministry of Finance, in 2011 and 2012, revenues from the royalty payments were recorded in the State Budget in a pool and no accurate records were held on royalty generated out of each local government unit. The Ministry of Finance reported that no sub-national transfers were made to LGUs in 2011. In 2012, subnational transfers of Lek 41.7 million or 2.3% of total royalty transferable in accordance with National law on taxes.

2.   Reconciliation in 2012

Selection of reporting entities

All companies operating under an exploration license in oil, gas, and mining and a production license in oil and gas were required to report under the EITI Standard. Thus, cash flows reconciled for the oil and gas sector represent 100% of cash flows contributed by the sector for the selected revenue streams.

Because of the large number of small-scale producers in the mining sector, certain materiality criteria based on annual turnover and production were applied to select the significant producers. The selection resulted in 69 mining companies, which based on the statistics provided by AKBN, comprise 77.1% of the production value.

The total number of licensees selected for the reconciliation process was 78, comprising 8 oil companies, Albpetrol, and 69 mining companies. By the date of this Report 74 out of 78 licensees reported payments to the State and Albpetrol as per the required revenue streams.

The State Institutions that participated at this reconciliation work were: The Ministry of Energy and Industry, The Ministry of Finance, The General Tax Directorate, The General Customs Directorate, AKBN, SHGJSH.

By the date of this report cash flows were reconciled to 99% of cash flows reported from licenses and the Government or licenses and Albpetrol.

Full Report…