Winter 2004–2005 1

 Southeastern Europe

Commercial Quarterly

A publication of the U.S. Department of Commerce, International Trade Administration, 

Central and Eastern Europe Business Information Center (CEEBIC), in cooperation with 

the U.S. Agency for International Development

Winter 2004–2005

Inside this Issue

To Our Readers

Commercial Opportunities 2

Exporter’s Corner 3

Southeastern Europe Potpourri 3

Market Brief 4

EU Accession Extras 7

With the September 2004 issue, 

CEEBIC’s long-running newsletter, 

Central and Eastern Europe Commercial 

Update, ceased publication. It has been 

replaced by this new quarterly publication that you now hold in your 

hands, the Southeastern Europe Commercial Quarterly. This change partially 

reflects a change in focus that came 

with the accession of some countries 

in the CEEBIC portfolio to the European Union. Readers of our new quarterly will continue to find here the same 

mix of in-depth reports on business 

developments in our region and listings of business opportunities for U.S. 

companies. As always, we invite your 

comments and welcome you to visit 

our Web site for more information, at 

www.mac.doc.gov/ceebic.

Since 2001, Albania’s economy has been 

growing at nearly 6 percent annually, and 

future growth figures are projected to follow 

this trend. Albania’s growing economy is 

unable to meet current market demands 

for energy, and the country experiences 

frequent power shortages. To continue this 

upsurge of economic growth, Albania is 

restructuring many aspects of its energy 

sector and is developing new projects to 

increase its energy supply. Albania’s power 

generation and transmission equipment is in 

general need of upgrade and rehabilitation. 

The Albanian government is also seeking 

to diversify the country’s sources of energy; 

currently 95 percent of Albania’s electricity comes from hydropower generation. In 

many rural areas, there continues to be a 

reliance on wood fuel. 

Electricity Generation

The upcoming restructuring and future 

privatization of Albania’s state-owned electricity monopoly, Albania Power Corporation (KESH), may offer export and investment opportunities for U.S. companies. 

KESH is responsible for generation, transmission, and distribution of electric power. 

Approximately 95 percent of KESH’s electricity generation comes from hydropower 

plants, mostly located in the 

northern half of the country. 

Only 5 percent of electricity 

generation comes from 

thermal power plants. On 

average, KESH generates 4,160 

GWh of 

electricity 

annually. 

Nearly onethird of 

electricity 

production 

is lost 

because 

of poor 

transmission facilities, combined with outof-date production equipment. Albania 

regularly experiences power shortages and 

must import electricity to meet demand. 

Additional energy production is crucial, as 

current production only covers one-half to 

two-thirds of domestic demand. According to the Albanian government’s National 

Strategy for Energy, by 2015 the demand for 

energy from industry will reach 539 ktoe 

(thousand ton oil equivalent), 629 ktoe from 

residential, 572 ktoe from services, 16.4 ktoe 

from construction, and 1,001 ktoe from 

transportation.

The Albanian government, with the assistance of the international community, has 

developed a strategy for the electricity sector, 

which includes restructuring the electricity industry and its regulatory framework, 

liberalizing the market and unbundling 

the electricity company, participating in 

the regional energy market, and planning for privatization. As a precursor to 

privatization, KESH will be spun off into 

at least three companies for generation, distribution, and transmission. 

In July 2004, KESH established a 

Albania’s Energy Sector

—An Electrifying Future

Albania’s Energy Sector—continued on page 6
6 Southeastern Europe Commercial Quarterly

Transmission System Operator, a key step 

to moving forward on the separation of 

generation, distribution, and transmission 

activities. The Transmission System Operator is critical for monitoring and controlling 

the main hydro and thermal generation 

resources and for ensuring the optimal and 

safe functioning of the national high-voltage transmission network. The government also plans to increase transmission 

efficiency and reduce losses by developing 

a high-voltage grid of 400 kV, 220 kV, and 

110 kV lines. That project will also involve 

installing energy meters and expanding and 

strengthening the network, with the installation of 6,800 transformers in rural zones. 

Total investments needed for transmission 

improvements for 2002–2005 are estimated 

at $60.93 million, and $290.14 million in 

investments will be needed for 2006–2015.

Thermal Power

The Vlora Energy Park is Albania’s largest 

and most complex economic development 

project. The project is supported by several 

international financial institutions, including the World Bank, European Investment 

Bank, and European Bank for Reconstruction and Development. The park covers 

1,625 hectares and consists of (1) a 400-plus 

megawatt thermal power plant to be built in 

phases, (2) storage facilities for hydrocarbons 

such as liquefied petroleum gas and liquefied natural gas, (3) a refinery and oil separation plant, and (4) industrial processing 

and manufacturing facilities. Selection on 

the $120 million, 125 MW oil-fired thermal 

power plant is expected to be completed by 

the end of 2004, with construction to begin 

thereafter. The construction will be done 

in two phases. The 125 MW Phase I of the 

Vlora thermal energy plant will begin producing electricity in 2006 and will have an 

estimated cost of approximately $137 million. The second phase, which will expand 

the plant to 300 MW capacity, will have an 

overall estimated cost of $217 million and a 

construction period of 24 months once the 

project is approved. Significant contracting 

and subcontracting opportunities for this 

project are anticipated for U.S. firms. 

A power company has submitted another 

proposal to the Albanian government for the 

construction of a 1,200 MW gas-fired thermal power plant that is designed to connect 

to the Albanian power system and allow for 

the export of electricity to Italy. The estimated cost would be around $1.2 billion.

Oil Sector

Albania relies on the importation of oil to 

meet its domestic demand. Albania extracts 

oil from 12 oil fields with 3,123 operating 

oil wells. Albania has 165 million barrels 

of proven oil reserves and has offshore 

oil reserves. The offshore oil exploration 

activities show that potential oil reserves are 

estimated to be 50 

million cubic meters, 

and may be as high 

as 200 million cubic 

meters. The most 

probable new areas 

for oil exploration 

are in the Shpiragu 

region, where the oil 

concentration capacity in drilled wells is 

being evaluated; the 

Palokastra and Vlora 

region, where the 

results from the drilling of two wells are being analyzed; and the 

South Tirana region, where the drilling of oil 

wells is under way and results may be available by the end of 2004.

Three companies dominate the oil sector 

in Albania: Albpetrol, which handles oil 

extraction; Servcom, which is responsible for 

services; and ARMO (Albanian Oil Refining 

and Marketing), which manages refining and 

marketing. Oil extraction centers are located 

in Berat and Fier. The two major refineries 

are at Ballsh and Fier. The refinery at Ballsh 

has a capacity of 1 million tons; both refineries tend to operate at only 30 percent of 

capacity. Several foreign companies have 

been exploring and producing oil in Albania 

since 1992, including Occidental Petroleum, 

OMV, and Lundin Petroleum. 

The privatization of Servcom is well 

under way, with the Albanian government 

reviewing offers from strategic investors 

interested in purchasing shares of 51 percent 

to 80 percent of the company. The Albanian 

government recently announced they are 

accepting expressions of interests from strategic investors for a minimum of 51 percent 

of ARMO’s shares. Once the expressions of 

interests are received in early December, the 

Albanian government will then invite interested investors to submit their offers. The oil 

extraction company, Albpetrol, is scheduled 

to be privatized by the end of 2005. 

AMBO (Albanian-Macedonian-Bulgarian 

Oil), a U.S. consortium, has been promoting 

a pipeline that would follow the route of EU 

transportation Corridor VIII. The pipeline 

route would link the port of Bourgas, which 

is on the Black Sea coast of Bulgaria, with 

the port of Vlora, which is on the Adriatic 

coast of Albania, to transport oil from the 

Caspian region to Western Europe and the 

United States. If this project is adopted, 

there may be export and subcontracting 

opportunities for U.S. companies. The pipeline will be 576 miles long and will transport 

more than 40 million tons of oil per year.

Renewable Sources of Energy

Wind and solar energy exploitation is an 

area in which government, international, 

and private investments are anticipated. 

Currently, Albania does not have operational wind energy power plants. To explore 

wind generation, the government is seeking 

investors to install 20 new windmills, with 

a capacity of 400 GWh per year, along the 

Adriatic coastline. Because of its geographic 

location, Albania has hot, dry summers, so 

Albania’s Energy Sector — continued from page 1

continued on page 7
Winter 2004–2005 7

there is potential for the development of 

solar energy. As part of its national energy 

strategy, the Ministry of Industry and Energy 

is seeking investors to install enough solar 

panels to provide 62.9 ktoe energy by 2015. 

The total investment cost is estimated at $79 

million. The United Nations Development 

Program, through its Global Environment 

Facility, has undertaken several projects to 

encourage the use of solar energy and educate the public on energy efficiency. 

Additional Resources 

for U.S. Companies

Given the significant U.S. export and 

investment opportunities in all areas of 

Albania’s energy sector and the Albanian 

government’s desire to involve U.S. companies in this strategic sector, CEEBIC has created a new section on its Web site devoted 

to Albania’s energy sector: http://www.mac.

doc.gov/ceebic/countryr/albania/Energy1.htm.

Please visit the Web site for more detailed 

reports on the subcategories of Albania’s 

energy sector as well as on tenders, projects, and trade and investment leads in the 

energy sector. 

Sources

Country Commercial Guide: 

www.export.gov/ceebic

Biznesi: www.biznesi.com.al

Albania-EU Energy Efficiency Centre: 

www.eec.org.al

Albanian Daily News: www.albaniannews.com

World Bank: www.worldbank.org.al

Panorama: www.panorama.com.al

Albania International Investors Conference 

Energy Sector Review: print publication 

available through CEEBIC at (202) 482-2645 

or via email at ceebic@ita.doc.gov

Albania–EU Energy Efficiency Centre: print 

publication available through www.europa.int

Ministry of Industry and Energy of Albania’s 

National Strategy of Energy: print publication available through CEEBIC at (202) 482-

2645 or via e-mail at ceebic@ita.doc.gov

Regional: Simplified Preaccession Funds 

The European Commission has 

decided to simplify the current financial 

system for allocating assistance. The simplified system will apply to Croatia, Turkey, 

and potential candidate countries from the 

Western Balkans. Instead of the existing 

extensive collection of geographical and 

thematic instruments, such as PHARE, ISPA, 

SAPARD, and CARDS, only six instruments 

will be required under the new framework, 

including the following four which are new: 

European Neighborhood and Partnership, 

Development Cooperation, Economic Cooperation, and an instrument for stability. The 

two remaining instruments are Humanitarian Aid and Macro-Financial Assistance. 

(Source: EU Enlargement Weekly) 

Croatia: Preaccession 

Strategy Announced

As part of the European Union 

(EU) enlargement agenda, the European 

Commission has offered some recommendations that will help Croatia move toward 

EU membership. The European Council 

plans to begin negotiations with Croatia 

in early 2005. A formal review of Croatia’s 

progress toward membership will take place 

next year. In autumn 2005, the commission will start issuing regular reports on 

the country’s progress. The commission 

has also recommended that Croatia receive 

€105 million in preaccession funds (PHARE, 

ISPA, and SAPARD) in 2005 and €140 million in 2006. Starting in 2007, Croatia will 

receive funds from the EU’s new preaccession instrument. The amounts to be 

allocated are currently under discussion. 

(Source: EU Enlargement Weekly)

Macedonia: European 

Union Questionnaire 

Received

On October 1, European Commission 

President Romano Prodi delivered the 

commission’s questionnaire to authorities 

in Macedonia. The questionnaire contains 

approximately 4,000 questions, examining 

both political and economic criteria in addition to all areas of EU legislation. Answers 

to the questionnaire will contribute to the 

commission’s analysis on Macedonia’s overall readiness for EU membership. Prime Minister Hari Kostov stated that the work would 

be complete by January. The questionnaire 

is a positive sign of the progress Macedonia 

has made toward EU integration. (Source: 

European Union)

EU Accession Extras