The long shadow of an oil legacy Fact finding mission report from the Bankers Petroleum oil fields at Patos Marinza, Albania February 2014 Introduction The Patos-Marinza oilfield in Albania is have senior staff available to meet the team continental Europe’s largest onshore oilfield. during this time, the only very limited contact Bankers Petroleum (Bankers), the Toronto and with the company was at its information centre London-listed company that has a 25-year in the project area. Furthermore the team was license agreement with the Albanian National only able to visit three villages4 – Kallmi i Madh, Agency for Natural Resources and the state Jagodina and Zhares – before security escorted oil and gas company, Albpetrol, estimates the team out of the area and suggested that that Patos Parinza contains approximately we should not be seen on Bankers’ property 5.4 billion barrels of original oil. Bankers also until appropriate authorisation and a company holds full rights to the Kuçova oilfield 20 guide were provided by the decision of a kilometres east of Patos-Marinza, which has Bankers’ vice president. The boundaries were 297 million barrels of original oil-in-place, and ill-defined as the ‘white gravel roads’, but as well a seven-year exploration license on the considering that residential and industrial 185,000-acre Block F, which is contiguous to areas are mixed and no road signs exist, the Patos-Marinza field and is prospective for observing such borders is difficult. natural gas. During a meeting with the EBRD,5 the bank In early 2008 Bankers started vertical and said that Bankers is worried that, because of horizontal infill drilling and initiated waterflood increased interest in their operations from development and thermal programmes in NGOs, more people will visit their premises order to substantially increase oil production eg to take pollution samples, so security risks and reserves. In 2009 the company received are increasing. The bank was disappointed joint financing from the International Finance however to learn that the team was not Corporation (IFC) and the European Bank for allowed on the premises and about the overall Reconstruction and Development (EBRD). The unaccommodating atmosphere encountered mirror facilities include each USD 50 million during the visit. long-term borrowing based debt, a USD 5 million environmental remediation loan, and The team met also with the Prefect of Fier and an equity stake of up to USD 10.4 million.1 In seven local mayors6 and with representatives 2013 the USD 50 million borrowing based debts of the Ministries of Environment and Energy, were increased to USD 100 million by each which to some extent provided a fuller picture institution,2 3 bringing the total investment up in spite of the limited access to Patos Marinza. to USD 230.8 million. A number of questions remain, including unresolved grievances from local communities Representatives from CEE Bankwatch Network and Bankers’ communication and consultation and EDEN Center in Albania visited the area practices with impacted stakeholders about around Patos-Marinza during 3-7 February infrastructure developments like the expansion 2013. Since Bankers explained that it did not to Block F and the Kucova field. This Kallmi i Madh resident lives just metres from the road and believes that the cracks in his walls and roof are caused by passing trucks. The long shadow of an oil legacy 3 times during the visit to Albania, we enquired Summary about the amount of taxes Bankers pays in Albania. Bankers enjoys a tax holiday on its Pollution goes hand in hand with extractive income, and the Ministry of Energy explained industries, and the Patos-Marinza area has that at Bankers, “a profit was still not realised, been exploited for decades, so the team was because Bankers keep investing in exploration prepared for the unpleasant smell in the air, technologies.” The new Albanian government sludge pits, rusty scrap heaps, dusty roads has introduced some fiscal changes for 2014, and heavy lorry traffic. What the team was however these are expected “to have minimal unprepared for was the level of poverty and impact on [Bankers] ongoing business,” abject squalor of the local villages. Poverty according to its Operational Update for the of this scale in communities living in the Fourth Quarter of 2013. These measures shadows of extractive industries is not typical, include the removal of the VAT exemption, at least not based on our observations over for which the company will be fully reimbursed more than a decade and half across eastern on a timely basis by the government. Similarly, Europe. This is even more unexpected given the potential implementation of an Excise the financial support for Bankers from two Tax on imported petroleum products from well-known public financial institutions with April will likely be bypassed, considering the explicit mandates related to development: in government is currently consulting it with the case of the IFC, the alleviation of poverty; industry members8 and has just signed a and the promotion of environmentally-sound, Foreign Investment Promotion and Protection sustainable development, in the case of the Agreement with Canada.9 EBRD. A related issue is the domiciling of Bankers Given the abysmal economic situation in entities for tax purposes. The oil fields at the communities neighbouring Bankers, the Kucova are operated by Sherwood International issue of greatest concern among local people Petroleum Ltd, a Cayman Islands-registered, unsurprisingly is unemployment. While there is wholly-owned subsidiary of Bankers10 that the a great deal of economic activity in the area, the company acquired in 2008. The EBRD has a local communities receive significant pollution policy on offshore jurisdictions that requires but do not get compensated for example with justification in cases where clients register increased opportunities for jobs. Bankers entities in a tax haven, which the Cayman reports that 85 per cent of its workforce is Islands is, by the definition used by the EBRD. Albanian but does not specify how many of When asked about the status of Bankers these employees are local. Furthermore most Cayman, the EBRD said it was unaware of any jobs are subcontractors who relay on their own incompatibility with EBRD policy and that in workforce, and reportedly there has been no any event it would not be applicable since effort to persuade subcontractors to consider operations are not yet underway at Kucova. hiring qualified workers locally. Yet the Chief Inspectorate at the Ministry of Environment negated these claims, alluding to While Bankers has made efforts to develop problematic levels of pollution documented in the community through social investments, the quarterly monitoring reports of Sherwood some locals and authorities find these projects operations at Kucova. and initiatives inadequate or ill-advised. For instance, although Bankers advertises its local On the local level, we were told that the 7 Agricultural Support Initiative, the team did company pays regularly, however the amounts not find any evidence of its effectiveness, and are ‘ridiculously low,’ and the company has on the contrary, heard several accounts that requested that the payments should decrease dust and air pollution cause regular damage because of the environmental improvements to agriculture in the area. More transparent it has implemented.11 At the same time, local and participatory decision-making about authorities are not receiving their 25 per cent social investments may help to better assess of the ten per cent royalty collected by the the needs and priorities of the communities, state, and the Ministry of Energy added that which may be the task of ‘a working group the company is not even paying the full ten per that shall seek for better allocation of funds cent,12 as the company claims to use some of from Bankers,’ as suggested by the Ministry the money for environmental measures. of Energy. It is not uncommon for foreign investors to As the retort “Corporate Social Responsibility get tax cuts or concession fee reductions is not philanthropy” was repeated several 4 The long shadow cast by an oil legacy for having to deal with historic pollution siting of sludge pits or traffic routings. To of decades-long underground resources make matters worse, when locals organised extraction. In the case, however, Bankers protests against the construction of the pits, claims that is not contractually obliged to police was sent in to forcefully disperse the carry out environmental remediation, and villagers. After the last bout of protests in thus presents it as some kind of a charitable March 2013, village leaders recounted being activity. Then the questions arise as to what summoned to the police on several occasions are the conditions for the above mentioned tax for interrogation, and although no official cuts, and what indicators are used to measure proceedings were initiated, the locals consider progress with regards to environmental such dealings with the police intimidating. As a improvements. In a situation when there result there is fear among the community and are subjective and widely contradictory a lack of hope that solutions will be found in a assessments about Bankers’ achievements in participatory way, through consultations and cleaning up the area, some objective criteria the type of engagement expected of projects must be used to assess the positive impacts. financed by the IFIs. Villagers mentioned having requested meetings with Bankers on During the visit it was particularly hard to several occassions but the company did not establish what environmental remediation reply any of the requests. measures have been made. From the point of view of local communities, the environmental These issues are compounded by the fact that clean-up has been limited, for example by local authorities lack the necessary capacity, concentrating pollution into open air sludge and supposedly sometimes the integrity, to pits and increased transportation of oil tank act in the interests of impacted villages.