Albania has announced the open tender for the Areas 4, 5
and Dumre, C and Panaja with deadline of application 15.07.2015. Meanwhile for
the onshore and other offshore Areas, due to the consolidation of seismic data,
to a postponed period. The “Petroleum Law”, No. 7746, date
28.07.1993, authorizes the Ministry to enter into a Production Sharing
Agreement (PSA).

to “Petroleum Law”,
the Production Sharing Agreements PSA regard
the Cost Oil and Profit Oil Sharing regime
establish by first that the exploration expenditures and capital expenditures
are recoverable only in the case of a commercial discovery but not before the
start-up of production. Operating expenditures are recoverable during the year
in which they are incurred. Reasonable and necessary administrative
expenditures of the Contractor are recoverable.

negotiable set of a sliding scale of daily production for the part of oil
referred to as “profit oil” can be used to share the profit. Based on that
model, the oil from which costs are recovered is referred to as “Cost
Oil”. The remaining part of production, which is referred to as
“Profit Oil” is shared between National Agency of Natural Resources
and the Contractor according to the sliding scale (bbl/day);

an “R” factor model can be also used to Profit Share. The “R” factor
is defined as the ratio between the cumulative revenues of Contractor reduced
by cumulative tax assessed on Contractor and the cumulative costs and expenses
incurred in Petroleum Operations. Based on different negotiated “R”-factor
values, after the Cost Oil is recovered, the remaining part of production,
which in this case is referred to as “Excess Cost Oil”, is shared between National
Agency of Natural Resources and the Contractor.

Contractor is subject to tax on profit, according to the Law No. 7811, April
12, 1994, “On approval of Decree No. 782, February 22, 1994, “On the
fiscal system in the hydrocarbons sector (Exploration-Production)”, and
the Royalty according to the Law No. 9975, July 28, 2008, “On the National
Taxes”. The tax is at the rate of 50% of the realized profit and the Royalty is
10% of sales revenues. In compliance with the above-mentioned Law, The National
Agency of Natural Resources takes the Government’s tax and/or its share of
profit oil in cash.

Contractor shall have the right to receive and retain abroad the proceeds from
its export sales to the extent not required to meet on a current basis its
local currency costs in Albania. The Contractor shall have the right to convert
foreign currency into local currency at the generally applicable rate of
exchange for commercial transactions.

miscellaneous prevision regard the Contractor and its sub-contractors are
allowed to import into Albania all equipment and materials required for use in
petroleum operations provided that National Agency of Natural Resources has
certified that equipment and materials are to be used solely in petroleum
operations. By both, Law No. 7811, April 12, 1994, and Presidential Decree No.
1510, June 28, 1996, the Contractor and his sub-contractors are exempted from
the customs and VAT duties and obligations either for the imported goods and
services or services provided by the local market.

Contractor may export the share of production to which he is entitled. The
Contractor may assign all or part of its interest under the contract to any
affiliate or third party, which assignation is subject to a guarantee for the
performance of Contractor’s obligations to be submitted by the assignee, as
well as subject to the consent of the National Agency of Natural Resources.

petroleum agreement and petroleum operations are governed by the laws of Albania
and the generally accepted practices of International Oil Industry. Arbitration
shall be in accordance with the Uncitral arbitration rules, preferably under
English Law. All international oil industry investments are fully protected (as
are all foreign investors) pursuant to Law No. 7764, November 22, 1993,
“On Foreign Investments”.

For more keep update with the EU & WBs / Albania
Energy Investment Updates
or visit the Official Page of ACERC.