Albania – Dubious Deals

Incident: The sale of Albpetrol to ostensibly US-based Vetro Energy in September has been stalled after Vetro failed to make the deposit to back the guarantee. Vetro Energy was the highest bidder, with a $1.1 billion offer (€850 million), more than triple the value of Albpetrol's assets. Bankers Petroleum of Canada-the largest producer in Albania and the key company responsible for developing Albania's oil fields-also bid for Albpetrol, but was excluded in the first round with a lower bid of €304 million. In a private investigation at the time of the bidding process, Oilprice intelligence networks uncovered the true ownership of Vetro Energy, based in the US. Albanian tycoon Rezart Taci owns a 51% stake in Vetro Energy, though this information was only revealed to the public after the company won the tender for Albpetrol. The government is now waiting for Vetro to deposit 20% of the contract as a guarantee. Vetro has already missed two deadlines to pay the deposit and sign the contract. Still, the government is extending the deadline to an undefined date. However, if the sale collapses, the government will claim the cash already deposited (10%) with the tender offer.

Bottom Line: The failed closing of the sale of Albpetrol could be good news for the largest producer in Albania-Canada's Bankers Petroleum-and bad news for US/European/Azeri pipeline ambitions.

Analysis: Taci is a very influential figure. Taci owns the only two operating oil refineries in Albania and also owns the country's largest chain of gas stations, Taci Oil. He also owns all the country's refineries. His tactic for acquiring Albpetrol was in line with his typical modus operandi-to buy a company under another name and announce his involvement only after the fact. Taci has ties to the Albanian prime minister and has been cutting deals with Azerbaijan. That Vetro Energy would win the tender for Albpetrol was a given-so the delay right now means that either Taci is attempting to test the waters in a power play or somewhere along the line talks have collapsed with Azerbaijan.  

Significantly, Taci Oil owes massive debt to Albpetrol in the form of non-payment for oil supplies to the ARMO refineries. Taci's acquisition of ARMO was funded by the Bank of Azerbaijan, to the tune of €75 million. Taci has defaulted on that debt and in early August 2012, the Court of Tirana seized Taci's business assets, including the 85% of shares he owns in ARMO and 85% of his real estate holdings in Tirana.  Taci's advisor, a Bosnian by the name of Esad Puskar, has been holding meetings on Taci's behalf with high-level Azeri authorities for new investments in Albania. Before the tender opened for Albpetrol, Puskar had met with Azerbaijan's state oil company SOCAR, which Prime Minister Berisha invited in February 2012 to bid on Albpetrol. Essentially, Azerbaijan's entrance into the Albanian market was to be facilitated by Taci's ownership of Albpetrol. Taci and the Bank of Azerbaijan had come to a settlement agreement over the unpaid debt shortly before the bids were submitted for Albpetrol.

For Bankers Petroleum, which can be credited with making Albania's oil sector what it is today, the privatization of Albpetrol can be problematic to some extent. Had Bankers itself won the bid for Albpetrol, it would have afforded them the opportunity to control extraction, processing, and distribution of oil and gas in Albania. Conversely, the acquisition of Albpetrol by someone else could change the rules of the game. Particularly, Bankers has had problems with Taci in the past in terms of nonpayment.

The bigger picture is Azerbaijan and the Trans-Adriatic pipeline (TAP). While Albeptrol's above-ground assets are only worth about €300 million, and it has only a 5% share in the country's oil fields, new legislation grants its new owner to build a refinery and to transport and distribute natural gas, which would add up to about €20 million in annual revenues.  And this is what it's really all about for Azerbaijan, and for the US-European TAP ambitions. Albania would be a key link in the TAP and would be able to serve as a sort of natural gas warehouse for gas on its way to European markets that are struggling to get out from under Russia's grip. This is the deal they made with Taci, and this is why it is likely to go through eventually.