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Albania Plans to be Regional Powerhouse

18 05 2006  It may be plagued by electricity cuts today, but Tirana has set its sights on becoming a major exporter in future.

By Andi Balla in Tirana (Balkan Insight, 18 May 06)

Albania unveiled ambitious plans on May 15 to end the series of energy crises that have plagued the country since the fall of communism and become a regional exporter of power.

Still reeling from the crisis of last November, which imposed eight-to-11-hour power cuts on most of the country, Prime Minister Sali Berisha this week said the government was undertaking major projects to diversify its electricity sources.

Dependent for much of its history on power produced at large hydro-electric plants on the River Drin, the government says that type of natural resource can no longer satisfy the country's needs.

It is now turning its eyes onto electricity produced at thermal plants that use different types of fuels to produce energy. In Albania's case, the most viable source is seen in Liquid Natural Gas, or LNG.

"We cannot remain at the mercy of drought and rain but must swiftly increase the capacity of thermo-production," said Berisha.

The prime minister said he aimed to construct four thermo-electric plants in southern Albania.

The largest, to be built by an international consortium in the southern district of Fier, could alone meet all the country's needs, say officials.

In addition, the government wants to create large capacity lines linking Albania with regional networks in neighboring countries.
"By moving in these directions, the government aims to transform Albania not only into a country that produces sufficient energy for itself, but also as a regional exporter of energy," said Berisha.

The government says it is focusing in the south, because about 90 per cent of the electric energy produced in Albania comes from the hydroelectric plants in the mountainous north, where the Drin makes its way toward the Adriatic Sea.

The giant 1.9 billion dollar re-gasification terminal and thermal electric power generation plant in Fier will be jointly funded by a group of European and American investors with 660 million US dollars coming from the US Import Export Bank.

The Swiss-based consortium, ASG Power SA, is made up of the Swiss public utility AET and of Italian and American investors.

The consortium put together the agreement with the government last March and Albania's parliament is expected to adopt the plan this June.

The combined cycle-gas-fired power plant will be put online in three phases, eventually producing 1,200 MW of electricity. A LNG re-gasification plant, with a 10 billion cubic metre capacity, will receive the cooled and condensed liquefied natural gas, which will be stored at the terminal and converted back into gas for delivery via pipelines.

When the Fier complex is complete, Albania will be able to supply all its own power needs at lower-than-market rates and export the excess.

"This project will be the largest foreign direct investment project ever in Albania at 1.9 billion dollars," said the US ambassador to Tirana, Marcie Ries.

"On completion, it will provide enough energy to address all of Albania's power and gas needs. But in the larger scheme of things, it will … make Albania a major player in the European energy field."

Albania is expected to use about 2 billion cubic metres of gas with the remaining 8 billion pumped via a submarine pipeline to Italy.

Independently of the Fier project, government officials say they have found funding and started work on new lines linking Elbasan and Tirana in central Albania to Podgorica in Montenegro.

The government is working to find funding to link Vau i Dejës, a large hydroelectric plant in northern Albania, with Pristina in Kosovo, as well as linking Elbasan with Skopje in Macedonia.
While the liquid natural gas for the Fier project is expected to come from the Adriatic Sea, Albania has made it a priority to become connected by land to the international natural gas pipeline network.

To do so, it has increasingly set its eyes on Russia's energy giant, Gazprom.

Albania's foreign minister, Besnik Mustafaj, met Gazprom's president, Aleksei Miller, during the course of a mid-April visit to Moscow.

Mustafaj said he had pointed out the difference between supply and demand in Albania and added that Albania wants to diversify its energy sources.

"Connecting Albania to the regional natural gas pipeline network is one of the government's priorities and Gazprom is seen by the Albanian side as a real potential investor," Mustafaj said during the meeting, adding Albania wants work to start on the ground as soon as possible.

The Albanian foreign ministry said Gazprom was willing to send experts to Albania to assess the viability of building a pipeline not only to Albania, but to extend it over the Adriatic to Italy for export purposes.

Gazprom is currently the main source of LNG in the region, officials point out, and Albania needs to tap into that supply.
If Albania does become a future exporter of energy, it will not be for the first time. The country exported electricity and other energy resources to its neighbours before the fall of communism.

But in the early 1990s the country fell victim to a series of energy crises, caused by inefficient distribution and transmission networks, and more recently, by rising domestic demand.
Albania's power plant capacity is no longer capable of meeting this growing demand. The Albanian Energy Corporation, KESH, says capacity to generate electricity fell by 14 per cent over the last decade. But while the domestic supply dropped, the demand has constantly increased.

According to KESH, domestic production satisfied 97 per cent of domestic demand in 1990 but only 47 per cent today.
The rest of the energy has to be imported, causing crises, such as last November's, when not enough energy could be imported from neighboring countries, which have also had difficulties with electricity supplies.

Shaken by the last crisis, which reportedly decreased Albania's annual economic growth rate from 6 to 5.5 per cent in two months alone, the government says it wants to satisfy the domestic demand for more electricity as quickly as it can.
The energy and economy minister, Genc Ruli, said the goal was to satisfy all domestic needs by 2008.

The changes cannot come soon enough for businesses, which list power cuts as one of their main problems.

At a recent business forum in the northern city of Shkodra, businessmen said that even now that the immediate crisis was over, they still operate for much of the time on generators, owing to continuing power cuts. This raises production costs and lowers their competitive edge, they said.

The government is trying to provide some interim solutions. It is scrapping tax on fuel used for electricity production, for example.

But ultimately, officials agree, it will take at least two years before Albania can create the amount of electricity that it needs to supply the home market, before eventually catering for the regional market as well.



Andi Balla is the managing editor of the weekly English-language newspaper Tirana Times and a Balkan Insight contributor. Balkan Insight is BIRN's online publication.