Identifier
Created
Classification
Origin
08TIRANA916
2008-12-29 12:05:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tirana
how-toVZCZCXRO5943 OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG DE RUEHTI #0916/01 3641205 ZNR UUUUU ZZH O 291205Z DEC 08 FM AMEMBASSY TIRANA TO RUEHC/SECSTATE WASHDC IMMEDIATE 7725 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
UNCLAS SECTION 01 OF 02 TIRANA 000916
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE JISMAIL
E.O. 12958:N/A
TAGS: EPET ETRD ENRG ECON AL
SUBJECT: ALBANIA STRENGTHENS ARMO
REF: TIRANA 345
Summary
-------
UNCLAS SECTION 01 OF 02 TIRANA 000916
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE JISMAIL
E.O. 12958:N/A
TAGS: EPET ETRD ENRG ECON AL
SUBJECT: ALBANIA STRENGTHENS ARMO
REF: TIRANA 345
Summary
--------------
1. (SBU) A ban on imports of D2 diesel fuel has given the
recently-privatized petroleum refiner ARMO a monopoly over the
market for cheap but dirty D2 diesel fuel, Albanians' diesel of
choice. ARMO is Albania's only refiner, and has, by a decision of
the Council of Ministers, until January 1, 2011, to upgrade its
facilities to produce D1 to EU standards. But during the next two
years, ARMO can produce D2, and all other Albanian oil companies
will have to buy D2 from ARMO. According to industry sources, this
will put most independent oil companies out of business since
Albanian consumers are price sensitive and will not pay the
additional cost of cleaner D1 if they have a choice. The Albanian
partner of the consortium which now owns ARMO is Rezart Taci, owner
of Taci Oil, one of Albania's largest retailers. End Summary.
Oil Importers Being Squeezed
--------------
2. (SBU) Although the bulk of Albania's petroleum distillate demand
is for D2, a heavy grade of diesel being phased out in Europe due to
its higher level of pollution, as of January 1, 2009 importers will
no longer be able to import, store, or sell D2 unless it is produced
in Albania. According to Frident Kuqi, president of one of
Albania's largest importers/distributors of petroleum distillates,
the GOA has been trying to drive him out of business and, come
January 1, may finally succeed. Kuci owns Europetrol Durres Albania
(Elda),one of Albania's largest importers with 15 percent of the
market. In 2008, Elda imported 82 million liters of distillates, 70
percent of which consisted of D2 (a heavy grade of diesel, generally
used for heavy equipment, but widely used in Albania in all vehicles
due to its lower cost). In March 2007, the Council of Ministers
(COM) decreed that imported D2 may not be sold after January 1, 2009
to comply with EU anti-pollution standards. The cleaner but more
expensive D1 must be imported instead. GOA inspectors will have the
right to confiscate any imported D2 in storage or gas station tanks
after January 1.
3. (SBU) Kuci complained that this could put all oil importers out
of business. D2 represents 60 to 70 percent of their total
business. Albania's oil consumers are very price sensitive and will
not pay the additional 10-12 lek (appx. 8 cents) per liter for D1.
Kuci added that many importers like himself were forced to build new
storage facilities north of Durres at Porto Romano when the GOA
decided to move the oil terminals out of Durres. Kuci took out
loans of 15 million euro to finance the expansion of his company and
the recent construction of the storage tanks. He says he will not
be able to pay it back unless he is allowed to continue importing
and selling D2.
... while ARMO Reaps the Benefits
--------------
4. (SBU) On November 27, a consortium consisting of U.S. oil trader
Refinery Associates of Texas (RAOT),Swiss oil trader Anika
Enterprises (owned by Albanian oil trader Rezart Taci) and Mercuria
Energy group won a tender for state-owned oil company ARMO for 128
million euro. ARMO owns two refineries built by the Chinese 40
years ago to refine the heavy crude pumped from Albanian oil fields,
as well as oil terminals and storage facilities.
5. (SBU) According to a July 30, 2008 COM decision, D2 refined from
domestically produced crude oil can be sold until January 1, 2011.
Since ARMO operates the only Albanian refinery, if other Albanian
oil companies wish to sell D2, they must buy it from ARMO. As an
effective monopoly, ARMO will be able to charge whatever they want
for D2. Kuci finds it ironic that the D2 he imports from Russia has
a much lower sulfur content than that which ARMO produces and
consequently is much cleaner environmentally.
6. (SBU) Under state ownership, ARMO has historically operated at 50
percent of its capacity because the state-owned oil producer
Albpetrol was not able to pump more. However, Canadian oil company
Bankers Petroleum (BP) in 2004 bought the rights to take over
Albpetrol's wells, and has greatly increased pumping capacity,
exporting most of its production (reftel). Now ARMO will have a
captive market for D2 and will be able to absorb more of BP's
output.
Cmet --------------
7. (SBU) It is too early( totl o hswl lay out, but
conspiracy thoit ilcamtatthis is obvious collusionbtenTaci and the GO to drive
other importers out of business
and bu up strategic gas stations and other assets frpnniees on
TIRANA 00000916 002 OF 002
the dollar. Kuci has written the PM and Minister of Economy Ruli
several letters, but he is afraid that more forceful action, such as
a strike, will bring retaliation. On the other hand, it is not
clear what such a de facto monopoly might do for Albania's economy.
Once ARMO has upgraded the refineries to increase efficiency and
reduce sulfur content, the cost of their products may be less than
the cost of imports, possibly lowering the cost of fuels to
Albanians, in addition to the positive effects of reducing Albania's
balance of trade deficit and providing additional employment. In
any case, the GOA is clearly in the driver's seat and will be able
to strike deals on its terms with the importers.
CRISTINA
SIPDIS
SENSITIVE
DEPT FOR EUR/SCE JISMAIL
E.O. 12958:N/A
TAGS: EPET ETRD ENRG ECON AL
SUBJECT: ALBANIA STRENGTHENS ARMO
REF: TIRANA 345
Summary
--------------
1. (SBU) A ban on imports of D2 diesel fuel has given the
recently-privatized petroleum refiner ARMO a monopoly over the
market for cheap but dirty D2 diesel fuel, Albanians' diesel of
choice. ARMO is Albania's only refiner, and has, by a decision of
the Council of Ministers, until January 1, 2011, to upgrade its
facilities to produce D1 to EU standards. But during the next two
years, ARMO can produce D2, and all other Albanian oil companies
will have to buy D2 from ARMO. According to industry sources, this
will put most independent oil companies out of business since
Albanian consumers are price sensitive and will not pay the
additional cost of cleaner D1 if they have a choice. The Albanian
partner of the consortium which now owns ARMO is Rezart Taci, owner
of Taci Oil, one of Albania's largest retailers. End Summary.
Oil Importers Being Squeezed
--------------
2. (SBU) Although the bulk of Albania's petroleum distillate demand
is for D2, a heavy grade of diesel being phased out in Europe due to
its higher level of pollution, as of January 1, 2009 importers will
no longer be able to import, store, or sell D2 unless it is produced
in Albania. According to Frident Kuqi, president of one of
Albania's largest importers/distributors of petroleum distillates,
the GOA has been trying to drive him out of business and, come
January 1, may finally succeed. Kuci owns Europetrol Durres Albania
(Elda),one of Albania's largest importers with 15 percent of the
market. In 2008, Elda imported 82 million liters of distillates, 70
percent of which consisted of D2 (a heavy grade of diesel, generally
used for heavy equipment, but widely used in Albania in all vehicles
due to its lower cost). In March 2007, the Council of Ministers
(COM) decreed that imported D2 may not be sold after January 1, 2009
to comply with EU anti-pollution standards. The cleaner but more
expensive D1 must be imported instead. GOA inspectors will have the
right to confiscate any imported D2 in storage or gas station tanks
after January 1.
3. (SBU) Kuci complained that this could put all oil importers out
of business. D2 represents 60 to 70 percent of their total
business. Albania's oil consumers are very price sensitive and will
not pay the additional 10-12 lek (appx. 8 cents) per liter for D1.
Kuci added that many importers like himself were forced to build new
storage facilities north of Durres at Porto Romano when the GOA
decided to move the oil terminals out of Durres. Kuci took out
loans of 15 million euro to finance the expansion of his company and
the recent construction of the storage tanks. He says he will not
be able to pay it back unless he is allowed to continue importing
and selling D2.
... while ARMO Reaps the Benefits
--------------
4. (SBU) On November 27, a consortium consisting of U.S. oil trader
Refinery Associates of Texas (RAOT),Swiss oil trader Anika
Enterprises (owned by Albanian oil trader Rezart Taci) and Mercuria
Energy group won a tender for state-owned oil company ARMO for 128
million euro. ARMO owns two refineries built by the Chinese 40
years ago to refine the heavy crude pumped from Albanian oil fields,
as well as oil terminals and storage facilities.
5. (SBU) According to a July 30, 2008 COM decision, D2 refined from
domestically produced crude oil can be sold until January 1, 2011.
Since ARMO operates the only Albanian refinery, if other Albanian
oil companies wish to sell D2, they must buy it from ARMO. As an
effective monopoly, ARMO will be able to charge whatever they want
for D2. Kuci finds it ironic that the D2 he imports from Russia has
a much lower sulfur content than that which ARMO produces and
consequently is much cleaner environmentally.
6. (SBU) Under state ownership, ARMO has historically operated at 50
percent of its capacity because the state-owned oil producer
Albpetrol was not able to pump more. However, Canadian oil company
Bankers Petroleum (BP) in 2004 bought the rights to take over
Albpetrol's wells, and has greatly increased pumping capacity,
exporting most of its production (reftel). Now ARMO will have a
captive market for D2 and will be able to absorb more of BP's
output.
Cmet --------------
7. (SBU) It is too early( totl o hswl lay out, but
conspiracy thoit ilcamtatthis is obvious collusionbtenTaci and the GO to drive
other importers out of business
and bu up strategic gas stations and other assets frpnniees on
TIRANA 00000916 002 OF 002
the dollar. Kuci has written the PM and Minister of Economy Ruli
several letters, but he is afraid that more forceful action, such as
a strike, will bring retaliation. On the other hand, it is not
clear what such a de facto monopoly might do for Albania's economy.
Once ARMO has upgraded the refineries to increase efficiency and
reduce sulfur content, the cost of their products may be less than
the cost of imports, possibly lowering the cost of fuels to
Albanians, in addition to the positive effects of reducing Albania's
balance of trade deficit and providing additional employment. In
any case, the GOA is clearly in the driver's seat and will be able
to strike deals on its terms with the importers.
CRISTINA