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NEWSLETTERpublished by the

“Albania-EU Energy EfficiencyCentre” (EEC)

Address:Blvd. “Gjergj Fishta”, No. 10, Tirana, ALBANIAP.O. Box 2426Tel: + 355 4 2233 835; Fax: + 355 4 2233 834Email: info@eec.org.alInternet: www.eec.org.al

THE ENERGYIN ALBANIA

(NEWSLETTER)Other issues are available on EEC website

PUBLISHED BY THE“ALBANIA-EU ENERGY EFFICIENCY

CENTRE” (EEC)

ISSUE NO 50 • JUNE 2010

Inside this Issue

- FUTURE OF NATURAL GAS SECTOR IN ALBANIA

- ENER-SUPPLY PROJECT

FUTURE OF NATURAL GAS SECTORIN ALBANIA

1. Short History of the Natural Gas SectorFirst Natural Gas (NG) discovery dates 1968and production reached its peak in 1982 with0.937 Bcm/year. A total of 500 wells have beendrilled for NG.. The cumulative production ofNG from its start of production to now is esti-mated at 3.15 Bcm, while the associated gaspart is at 8.7 Bcm reaching a total of nearly 12Bcm. After 1990s, the production dropped rap-idly. The current number of NG producing wellshas fallen to about 20 with minimal flow ratesvarying from 300 to 200 Nm3/day/well. The cur-rent annual NG production level is at about 12Mcm/year.

Fig. 1. Profile of Natural gas production in Albania

Until 1990, the production of natural gas wasused by: a) chemical fertilizers industry, b) oilindustry and power generation, c) very limiteduse for the residential sector.

The current modest production of NG is usedby the oil industry for own needs (refinery).

2. Future Demand for Natural GasThe National Strategy of the Energy Sector of

 N a tu ra l ga s prod uc tion , 1 981 -1 99 5, M ln C M

01 002 003 004 005 006 007 008 009 00

10 00

1981

1982

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Albania prepared by NANR (National Agency for NaturalResources) in one of its main scenarios foresees an importantrole for the natural gas in the Albanian energy balance in thelong run as shown in the figure below.

Fig. 2. Energy demand and share of Natural Gas (source NANR)

The use of NG is expected to be mainly used for power gen-eration associated with a gradual use in industry and residen-tial sectors. Several studies have been undertaken to assess thedemand for NG in Albania and the whole western Balkans area.The estimations for the demand of NG in Albania vary from 0.8to 1.2 Bcm by year 2015 on the assumption that infrastructurewill be in place by year 2015, which has low chances to be true.Due to last global economic crisis and other factors the 2015year objective has high chances to be postponed.

Fig. 3. Expected use of Natural Gas in Albania (source NANR)

3. Important Developments Related to the Future of Natural Gas MarketFollowing a series of years of severe energy shortages mainly inthe electrical sector Albania has undertaken a serious reform inthis sector. Alter liberalisation of hydrocarbon by-products (die-sel gasoline etc.) market in early 1990 the next most importantreform was the restructuring of the electricity sector. This reformhas been lead by the principles of the relevant Directives of theEuropean Union. As a result, the sector has been unboundledfrom a single company (KESH) into three separate companiesbeing KESH Generation, OTS (Operator of the TransmissionSystem) and ODS (Operator of the Distribution System). AMarket Model for the electricity sector has been developedaimings to promote competition and investments in the sector.

In year 2009 ODS was privatized by CEZ company and isexpected to bring improvements in the quality of the distribu-tion system as well as to reduce the high non-technical lossesin the system. Such interventions basic have established solidbasis for the development of a competitive energy market whichis leading in a natural way to a more efficient use of energyand development of renewable energies. Need for use ofNatural Gas in the Albanian economy becomes so more evi-dent due to economic and environmental considerations.

Other important developments that have already pre-estab-lished a natural gas market in Albania include: • In year 2009 KESH.Sh.p.k, the Albanian Power state com-pany completed the construction of a new combined cyclepower plant in Vlora town with a capacity of 97 MW. Theplant has been designed to be fuelled by diesel oil interchange-able to natural gas while its capacity can be expanded up tothree times. The annual consumption of natural gas, if work-ing full time in base load, can reach 130 million Ncm that cango up to nearly 400 millions if capacity of the plant is tripled. • Besides power generation, the Albanian economy has beensteadily growing despite the global crisis which is expected tobe associated with increases in energy demand. • Other potential consumers of NG in Albania consist of 3large cement factories located in the central western part ofthe country.

4. Scenarios of Natural Gas supply of AlbaniaThe scenarios of supply of Albania with NG can be grouped asfollows: a) Eventual new HC (Hydrocarbon) discoveries. HCexploration under way including potential of sale gas develop-ment; b) Connection to the international pipeline NG networks;c) Construction of an LNG plant on the Albanian coast.

Except for any eventual new discovery of natural gas all otheralternatives are presented in a concentrated manner in the fol-lowing figure. From all the alternative projects under discus-sion TAP (Trans Adriatic Pipeline) project that is proposed byEGL, Statoil and recently by EON which are three major Eu-ropean companies is the best possible option for Albania.

Fig. 4. Alternatives of Natural Gas supply for Albania(map source: www.gie.eu)

As presented by the consortia on May 20, 2010 in Brusselsthis project is the most cost efficient because it goes along theshortest way, in shallower see waters and can also take ad-vantage from the underground storage capacities that Albaniahas in the existing depleted gas fields and salt domes. Albaniais now part of the European Energy Community Treaty thataims to assist the South Eastern European Countries (non EUmembers of the Western Balkans) for the preparation of theintegration of their energy sector with the relevant acts of theAcqui Communautaire and one of the projects supported inthis framework is the Energy Community Natural Gas Ringthat aims to connect all Western Balkan Countries in a singlering. In the mean time and dependent from a number of geo-political reasons, there are also two other projects that are sofar intending to by pass Albania. They are ITGI (Interconnector;Turkey - Greece - Italy that is the southern branch of Nabbucco)and South Stream, which is a project that aims to bring Rus-

 

LNG  

ITGI 

IAP  

WBR  

TAP 

sian gas into the EU markets via south Italy. It is in the bestinterest of Albania to take advantage from the transitingprojects going across Albania that aim to bring Caspian, MiddleEast and even Russian Natural Gas into the main markets ofthe European Union via south Italy than being simply an endconsumer of the before mentioned networks.

Fig. 5. Both ITGI and South Stream aim to bypass Albania (Source: http://www.energytribune.com)

5. Legislative and Regulatory FrameworkIn line with the objectives of the National Strategy of Energy,the Albanian Parliament approved the Natural Gas Law Nr.9946 on 30/06/2008. The Law defines two main roles: 1. METE (Ministry of Economi, Trade and Energy) is thehighest institution responsible to: a) Develop Policies and plansfor a sustainable development; b) Approve new NG Infra-structure; c) Prevent and manage crisis situation's; d) Approvetechnical and safety rules. 2. ERE (Albanian Energy Regulatory Authority) is respon-sible for the REGULATION of the NG activities, (except forthe activity of natural gas exploration and production, with re-spect to HC Law).

Based on this Law the Albanian Electricity Regulatory Authorityexpanded its scope of regulation to include gas and was trans-formed in the Albanian Energy Regulatory Authority. Besideshaving an additional member of the Board of Commissionerswith petroleum background, the ERE has started work for thepreparation of the regulatory framework for the Natural GasSector. So far ERE has amended its Rules of Practice andProcedures. With the assistance of USAID and the supportof the Secretariat of Vienna of the Energy Community it (ERE)has nearly completed the "Licensing Procedures" for the Natu-ral Gas Sector and the "Regulation for 3d Party Access" whileit is making progress in the preparation of all other necessaryregulations and methodologies that will ensure the functioningof the sector. One of main challenges in this process is thepreparation of a market model for the Natural Gas Sector inAlbania. METE on the other side is working with the proce-dures for the approval of New Infrastructures in the NaturalGas Sector and the preparation of Technical Regulations.

Shkelqim BOZGOCommissioner

Albanian Energy RegulatoryAuthority

ENER-SUPPLY PROJECT

1. What does ENER-SUPPLY Stand for?The ENER-SUPPLY project is financed by the South-EastEurope Transnational Cooperation Programme of the EU. It isa joint effort of 14 partners from 11 SEE countries, leaded bythe Municipality of Potenza, Italy. The project started in April2009 and will finish in March 2012. In South-East Europe(SEE), the transfer, experimentation and consolidation of know-how related to the use and production of energy, following agood planning and employing the appropriate managementmethods, are important for the improvement of the energy bal-ances of the countries. The ENER-SUPPLY project will as-sist the local authorities in these activities, particularly in rela-tion to the utilization of Renewable Energy Sources (RES) andthe implementation of Energy Efficiency (EE) measures. Themain project activities are: 1. Transfer of knowledge about RES utilization from the ex-perienced countries to the partners and local authorities fromthe less experienced countries; 2. Experimentation of good practices of Energy ManagementsSystems (EMS), including introduction of EMS concept, test-ing and evaluation of the EMS implementation in selected localterritories; 3. Encouraging RES & EE investments in the territori-es,through: developing maps of RES potential, feasibility studiesfor RES & EE, identification of financing oppor-tunities andpromotion of results to potential investors.

2. What are the Project Objectives?The public administrations could lead the changes towards moresustainable energy production and use, by supporting EE andutilization of RES. ENER-SUPPLY project aims to enhancethe activities of the local administration in SEE countries in thefields of RES & EE. The specific objectives of the projectare: 1. To develop the capacity of the local administration in thefield of EE, including energy audits in buildings and industry,feasibility studies for EE measures, financial sources andschemes, energy management systems, EU legislation, and de-velopment of EE action plans; 2. To develop the capacity of the local administration in thefield of RES, including feasibility studies, financial sources andschemes, RES potential maps, EU legislation, and developmentof RES action plans; 3. To attract private and public investments in the field of RES& EE in the selected territories.

3. Who will Benefit from the Project?The project target groups (beneficiaries) are: 1. Local stakeholders, that could foster or hinder RES/EEdevelopment, i.e: a) local political decision-makers and admin-istrative officers; b) construction companies and professionals(architects, engineers, geologists); c) energy distributors; d)environmental associations, associations of consumers, asso-ciations of farmers, associations of enterprises general public. 2. National authorities, that have to be aware of the projectresults and where possible, to adapt the National Legislationaccordingly, i.e: a) Ministry of Energy and/or Ministry of Envi-ronment and/or Ministry of Regional Affairs (Regional Devel-opment); b) Energy Agency in charge of the National ActionPlan for EE, Energy Agency responsible for RES plans. 3. Potential investors, i.e: a) banks and equity funds; b) en-ergy enterprises and their associations, energy distribution com-panies, energy efficiency service providers (e.g. ESCOs).

4. What Activities will be Involved?A Needs survey on the level of knowledge of the target groupsabout the main aspects, related to RES & EE planning: techni-cal, financial & regulatory, will define the scope and the struc-ture of the training programmes, targeting the local and re-gional authorities. A 60-hour training course on RES and 40-hour training course on EE with an emphasis on energy man-agement systems will take place in each country. The latterwill constitute the preparatory phase to EMS experimentation -an EMS adapted to the local needs will be applied for 10-12months in each country.

RES & EE potential maps and Feasibility studies will be de-veloped. Through the RES & EE potential maps, the mostinteresting and promising opportunities for RES projects andinvestments in EE will be identified. The defined investmentswill be further detailed by feasibility studies, containing thetechnical and economic specifications, environmental impactanalysis, legislative constraints analysis, financial opportuni-ties. Action Plans for the areas, based on preliminary analy-ses of the state-of-the-art, will be set up in close co-operationwith the local authorities.

The extensive Communication & Dissemination activities(events, newsletters, articles, brochures, etc.) aim to raise theawareness of the RES & EE opportunities and to promote theproject findings among the main local stakeholders, central au-thorities and potential investors during the whole project period.

5. Who is Carrying out the Project? • Comune di Potenza, Italy (Coordinator). • Centre for Renewable Energy Sources and Savings (CRES), Greece. • Energy Efficiency Agency (EEA), Bulgaria. • Black Sea Regional Energy Centre (BSREC), Bulgaria. • Center for Promotion of Clean and Efficient Energy in Ro- mania (ENERO), Romania. • Center for Environmental Studies, Hungary. • Faculty of Business Economy, University of Economics, Slovakia. • Universitá Politecnica delle Marche, Italy. • Centre for Studies and Experimental Research in Geote- chnologies, Italy. • Energy Institute Hrvoje Pozar (EIHP), Croatia. • University of Novi Sad, Serbia. • Energy Agency of the Republic of Macedonia, The Former Yugoslav Republic of Macedonia. • Albania - EU Energy Efficiency Centre, Albania. • Regional Education and Information Center for sustain- able development in South-East Europe (REIC), Bosnia & Herzegovina.

6. About SEE Transnational Cooperation ProgrammeThe programme's global objective is to improve the territorial,economic and social integration process in South East Europeand contribute to cohesion, stability and competitiveness of thearea through the development of transnational partnerships andjoint action on matters of strategic importance. In addition, theSEE Transnational Cooperation Programme seeks the fullparticipation of non-Member States in the programme areabenefitting from the external Pre-Accession Assistance and theEuropean Neighbourhood Policy funding. The programme areais located at the South Eastern edge of the Union, where sev-eral accession candidate countries and potential candidatecountries as well as third countries engaged in the EU partner-ship framework are concentrated, thus going far beyond theexternal borders of the EU. More information is available atthe Programme website: www.southeast-europe.net

Project coordinator:Mr. Marco CaponigroComune di Potenza, ItalyE-mail: marcocaponigro@tiscali.it

Local partner:Dr. Eng. Edmond HIDO

Energy Efficiency CentreE-mail: ehido@eec.org.al