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ALBANIA GAS SYSTEM

MArch 2010

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Contents

DEvELopMENT of ALBANIA GAS SYSTEM .......................................................... 3

Top pLAYErS IN ThE GAS SEcTor ........................................................................ 5

Albpetrol ShA ........................................................................................................... 5

LEGISLATIoN .............................................................................................................. 6

prIcES AND oThEr prIcE –rELATED INforMATIoN ...................................... 6

coNNEcTIoN/AccESS To NEIGhBourING GAS SYSTEMS ............................... 7

MArkET DEvELopMENT forEcAST .................................................................... 8

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Development of AlbAniA GAs system

The development of the gas system of the Republic of Alba-nia began in the 60s’ when gas reserves had been found to the southwest of the country. Gas pipelines with an overall length of 600 km had been installed to connect the gas fields with the largest lo-cal consumers – thermal power plants (TPPs), smelters and fertilizer producers.

Presently, the Albanian gas network comprises some 400 km gas mains and ad-joining metering stations. The pipes are 325 mm and have transportation capacity of 100,000 cu m of gas per day. Due to the depletion of most gas fields, major-ity of the network is non-operational.

ExISTING GAS pIpELINES IN ALBANIA (DATA BY ThE oIL AND GAS TrANSporT DIvISIoN of ALBpETroL ShA)

Type operational Nonoperational Total

pipeline (km) 293 333 626

Gas pump stations(number)

3 5 8

Source:Albpetrol ShA

Although gas fields in Albania have outgoing pipelines to deliver natural gas to certain consumers, they could hardly form a gas network. The Albanian Energy Regulato-ry Au-thority (ERA) outlines the existing routes:

- a pipeline along the Adriatic coast, starting at Shkoder, northwestern Albania, through Durres, Kavaija, Divjaka, Pov-elca, Frakulla, Panaija and Vlore, western Albania, to Delvina and Finiq, southwestern Albania;

- a pipeline going to the southeast to Fier through Ballsh-Hekal and Gorisht, central Albania, to Delvina and Finiq;

- a pipeline bending northeast from Fier and extending through Patos and Kucho-va to Elbasan, central Albania.

ExISTING pIpELINES

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Albania does not have underground gas storages (UGS).

The construction and maintenance of the transportation and distribution networks, the gas storages, the terminals for liq-uefied natural gas (LNG), and the interconnection stations are approved by the Albanian government with special permits.

Other priority projects, beside plans for the construction of UGS, are the develop ment of the distribution grid, the re-placement of aged pipelines and the construction of cogen-eration plans.

There are two possible locations for the construction of a UGS – the depleted gas field near Divjaka and the salt for-mation in Dumre, central Albania. Although feasibility stud-ies have been carried out on both locations, their economic attractiveness is ques tionable. The project of Divjaka envis-ages a large number of wells, which means high maintenance costs. Moreover, the lower pressure in the storage could re-quire additional measures, which will probably increase the value of construction works with 50%.

The scenarios for the Dumre gas storage depend on its func-tion. If Dumre is de veloped as a storage to cover only na-tional needs, two 55-60 m caverns will be leached, each stor-ing some 65-75 million cu m of natural gas. Such a decision, however, will di minish the quantities as well as the chances of investment in salt production. The shap ing of the two cav-erns will take four years. In the second scenario Dumre will meet the need of the regional and the transit gas markets. The project includes the leaching of eight caverns with 70-80 m diameter, which will have a combined storage of up to 1.2 billion cu m of gas. It is very likely for the project to attract a salt production company to develop the mine and reduce the operation costs of the storage. Taking away the salt and leaching four caverns will take about eight years.

uGS projEcTS IN ALBANIA

Storage Divjaka Dumre - Alternative 1

Dumre Alternative 2

Working volume (mln cu m)

60 260-300 1,040-1,200

Cushion gas (mln cu m)

170 100 800

injection (mln cu m/day)

0.35 0.43 2.00

extraction (mln cu m/day)

0.50 1.29 6.00

pressure (bar) 110-130 90-215 90-215

project value (eUR mln)

39.0 68.0 73.0

Source: SEE Regional Gasification Study – Final Report, January 2009

uGS LocATIoN

Source: METE

Albania is among the few countries in SEE, together with Kosovo, Montenegro, and Macedonia to a certain extent, that do not have working gas distribution networks. Albania’s gas production and the existing pipeline along the Adriatic coast are prerequi sites for a future development of the gas net-work deeper into the country. The sharp de cline in gas pro-duction after 1990 and the depletion of the gas fields put the expansion of the network to a halt, and the without any gas in them the pipes were destroyed by cor rosion.

Between 2000 and 2008 state oil and gas company Albpet-rol ShA replaced 16 km of pipes along Balsh-Delina route, 3 km of the pipeline at the Divjaka gas fields and 0.4 km of pipes at the Frakulla field.

The increasing demand for natural gas in the country and the future gas projects in the region require Albania to have a well designed and properly managed gas system. SEE Re-gional Gasification Study, carried out for the World Bank and German investment bank Kreditanstalt fur Wiederaufbau (KfW), shows that the construction of a gas distribu tion net-works in the capital Tirana and Elbasan, one of the largest towns in the country, would cost between USD 1.7 mln and USD 2.3 mln, depending on the number of con nected clients. The installation costs for households will vary from USD 150 to USD 200, considering the type of building -a house or a block of flats.