Caspian Energy (CE): Mr. Minister, what is your opinion toward the Energy Union which is currently being formed on the border of Albania?
Damian Gjiknuri, Minister of Energy and Industry of Albania: Well the Energy Union is the idea of having a common energy market in the European Union and implies an integrated approach in energy. So our vision is, as a small country possessing a small market, a bigger market in the bigger Energy Union would be better for the energy security of Europe. I think Albania supports this idea. We are also located in the south eastern part of Europe trying to integrate our own market and markets of small countries, to couple these markets and have the same rules and the same environment in order for the energy business to thrive.
CE: What are the major priorities for the development of the energy sector of Albania?
Damian Gjiknuri: Of course, our priorities are to have stable supplies of energy resources. We have our own challenges especially in the electricity as we are a net importing country. One of the biggest challenges we have it is the establishment of a discipline in the electric power industry which means regular payment of electricity fees by consumers. It was always a problem in the past and created a financial crisis in the sector, which also affected the state budget. So our priorities is to expand production at home, secure supply and investments especially within the electricity distribution sector since it has grown old as early as since the communist times and needs sizable investments in order to secure quality of electricity and stability of supplies. The electricity distribution sector has been in service for more than 35 years. But in the meantime, we also want to explore our potential in hydrocarbons, especially in oil, as Albania is a non-oil country. We are also promoting aggressively other opportunities for foreign companies to get acreages, discover and drill in Albania for potential oil. We are working in this direction. Very soon we will give other blocks to companies even though the market is not good as it used to be in the past. But I think that there is still interest of many other companies in hydrocarbons.
CE: Does it also refer to gas? What could you say about the future of gas market and gas distribution inside of the country?
Damian Gjiknuri: Albania does not have a gas market or a gas distribution network. It is the reason why we see this connection with TAP as an opportunity for the country. Besides the fact that this pipeline is going to Europe, it is also a “window” and a source for gas in Albania. In the meantime, we are in the first steps of developing a gas master plan. We have had support of the European Union to start taking first steps in this direction. In the meantime, we have the support of the Azerbaijani government which we have an agreement with. According to this agreement, they will finance the feasibility study of the master plan on gasification of Albania in order to create a necessary infrastructure and domestic gas market prior to the beginning of gas supplies in 2020.
CE: Are there plans to pass this entire infrastructure to any certain company for creating and managing it, for instance to SOCAR?
Damian Gjiknuri: Absolutely. We don’t have anything against foreign companies. We are in fact looking intensively for a foreign company or a strategic partner to take over the distribution sector of Albania, invest there, and also create a market for its own and for the country.
CE: As a project participant, could you call present problems standing on the way of implementation of TAP?
Damian Gjiknuri: Of course, it is a big project. It has a lot of challenges in terms of financial challenges given the markets. There also may be some environmental challenges in some of the countries, but not in our country. We also have our own concerns, but I think the government is doing everything to support the project and so far we are in a very advanced stage of support. We have created all state structures in order to support smooth implementation of this project. Actually, it is supposed that this year in May the construction of roads and bridges will be the first real work we start with the Trans-Adriatic Pipeline project.
CE: How do you assess the present level of the energy security of the European Union? What role does Albania play in providing this security, considering the decisions that have been recently made within the framework of the Southern Gas Corridor and TAP project?
Damian Gjiknuri: I mean the fact that Albania is a transit country for the Southern Gas Corridor. The country’s stability, its own will to participate and be a part of this project means contribution. It is important for the European Union to have diversity of supply and routes. When it comes to gas, the supply from the Caspian Sea is another important source for the European Union to lower dependence on one direction. So, I think it is the direct contribution to the implementation of this corridor including our country’s participation.
CE: Considering the present implementation speed of the project, do you think TAP will be ready by 2020?
Damian Gjiknuri: I cannot make proper prediction as investors and shareholders are saying that everything there will be on time. But these projects are very challenging and sometimes it can take more time. The most important is that project is going on within the schedule and it has a clear objective which is going to be realized.
CE: What are the possibilities for energy cooperation with Azerbaijan? What conditions does Albania offer for foreign investments?
Damian Gjiknuri: Of course, being the source country of gas, Azerbaijan is a very important player in the energy security and being connected now with the pipe is of course important relationship for us. Also, given the fact that Azerbaijan is supporting us in the process of creation of the gas market and being a direct supporter and participant of that, it also strengthens the relationship between our countries. In terms of energy cooperation, it is becoming a very effective and intensive cooperation. We hope it will bring more Azeri investments in Albania, if there is an interest in gas they are welcomed there of course. If there is an interest in hydrocarbons, we do have them as well. There are also certain amounts of Azeri investments made into our country. We have refineries. The Albanian government has been in full support of developing also downstream products. I hope economic relations with Azerbaijan will have much wider portfolio also in tourism. I know that many Azeri companies have invested in tourism development in Montenegro and the question is why not in Albania? The country has a wonderful seaside, very similar culture. Albania is a friendly country and the relationship between our governments is at perfect stage. We also hope that President Ilham Aliyev will soon visit Albania as he promised. So, the governments are currently negotiating on this issue. This will boost a lot of relationship between the countries and I believe will open more opportunities in other fields for future investments and economic cooperation.
CE: Which energy dividends will Albania obtain in case it enters the EU?
Damian Gjiknuri: I think Albania has a lot of hydro resources, which are a source of clean energy. So, as a country-candidate for entry into the European Union, Albania can be a good source of clean energy in the future. So, this would be also a dividend, it would be a dividend both for the European Union and a dividend for Albania because if we develop our capacities in this type of clean energy, we can export them and thereby improve our trade balance and our economy. But also, in the meantime, we will contribute to the European better public policy objectives in regard to the climate change.
CE: Do you find measures that EU introduces to liberalize the energy market sufficient, and how does Albania intend to regulate these issues in the domestic market?
Damian Gjiknuri: The EU is going through the implementation of the third package aimed at further liberalization and further unbundling of the sector. Albania is also trying to do the same. Of course, it is not very easy for small markets, joining in this process, to cope with it. It is a challenge and it is the reason why south-eastern Europe is trying to cooperate in the issue concerning the decoupling and integration of local markets in order to create more opportunities for investments and the liberalization to go further. Liberalization is supposed to create more competition, better prices for customers, more technology advancement. We are in support of that. However, not all countries can cope with it. Countries have their natural disadvantages. So, for some countries this would be challenging, including my country.
CE: Which principles do energy producers have to follow in the issues concerning pricing of energy resources in Europe? Which is more favorable for Albania – long-term contracts or binding to the spot market?
Damian Gjiknuri: First of all Albania should integrate more with the European markets. We have already talked about liberalization. When it comes to energy producers, we want to ensure much broader production, liberalization, integration and interconnection, especially in the field of electricity, which will mean the growth of supply. As far as principles are concerned, it will be the principles of the free market. There is nothing special in here. In the meantime, we are trying to promote or incentivize our own production at home because there is a need for some incentives to develop further or to expand production capacities in Albania.
As to the long-term contracts and the spot market, this is debatable in many economic models. Sometimes long-term supplies can secure you more predictability. However it can hurt you in the long run if the markets go down. It happened in the past with gas when the countries were trying to secure long-term supplies. But when the gas prices changed, the spot market became more and more interesting and many companies suffered from long-term contracts. But anyway it is a kind of economic strategy depending on circumstances. In my opinion, all options are available as long as there is enough supply there.
CE: Are there any estimates or predictions about future gas consumption volumes in Albania?
Damian Gjiknuri: We are doing this study now. But we believe that 1bcm would be enough for needs of the country in the years to come.
Thank you for the interview
