TIRANA, Oct. 23 – A competition watchdog has temporarily suspended tender procedures on a controversial concession in the oil and gas inspection following a complaint by a Switzerland-based company over tailor-made criteria favoring a local Albanian company that has also been awarded a bonus for its unsolicited proposal.
Switzerland-based Penzoil Trading says it has addressed Albania’s Public Procurement Commission, an appeals body whose decisions are corrective and can be challenged with the Administrative Court, over alleged discriminatory criteria that make Albanian-owned Noa Control, already a favorite after received a 10 percentage point bonus last June, a pre-determined winner.
The tender to select a concessionaire to inspect fuel and liquid gas measurement systems for the next 20 years, switching to private hands a service currently carried out by the state-run Directorate of Metrology, was initially scheduled for Oct. 18, but will now be recalled only after a decision by the competition appeals body and if no legal battle is initiated with administrative courts.
Having an accreditation certificate issued by Albanian authorities and three years of inspection experience are described by experts as discriminatory criteria against both foreign and Albanian companies that could participate in the tender and tailor-made to the favorite Albanian-owned company that already has a certificate issued by General Directorate of Metrology and exactly three years in the inspection of water meters, liquid gas tanks and elevators.
“The fact that we end up awarding this profit-making service to a private company that will pay nothing to the state budget and that its investment will be minimal and generate safe profit, makes us think that this is a sectoral practice or policy that is not in the interest of consumers and state budget, but a practice that benefits certain segments maybe business nepotism,” says Gjergj Bojaxhi, a former deputy economy minister and a businessman in the oil industry, as quoted by the VoA in the local Albanian service.
Fuel station pumps currently undergo technical controls on meeting quantity and safety standards twice a year by state inspectors of the General Directorate of Metrology, with annual costs for fuel operators estimated at 14,000 lek (€110)/pump in a service that generates more than €635,000 a year and is the main income for the state-run metrology service and their staff of 120.
The concessionaire’s initial investment is estimated at only around 65 million lek (€515,000) at a time when the state-run Metrology service already possesses seven mobile labs worth more than €580,000 and a qualified staff.
The upcoming concession is once again being awarded through an unsolicited proposal receiving a bonus, a common practice which international financial institutions have called on Albanian authorities to give up as non-transparent and lacking thorough cost-benefit analysis.
Noa Control, an Albanian company cooperating with Spain-based Applus testing, inspection and certification services, received a 10 percentage point bonus for its unsolicited bid for the upcoming 20-year PPP, a proposal that dates back to December 2016 before getting the initial government okay in mid-2018.
To date, almost all companies that have been awarded bonuses for their unsolicited proposals have resulted in apparent winners in tenders where competition has been poor, giving rise to allegations of pre-determined winners.
The 20-year oil inspection PPP would guarantee the concessionaire an estimated €13 million in income for the next 20 years at current fees and much more under an expected hike in technical control tariffs or more frequent inspections.
That would be the second concessionaire in Albania’s multi-million dollar oil industry following the fuel marking concession run by Global Fluids International, a subsidiary of Canada-based Eurocontrol Technics Group, which in late 2013 started its 10-year national fuel marking and tracing contract with the Albanian government, charging 1 lek (€0.008)/liter.
Concern over new price hike
Albanian and foreign business representatives say a new controversial concession in the oil sector would further deteriorate the business climate in Albania by further increasing fuel prices, already one of Europe’s highest in one of Europe’s poorest countries due to the high tax burden levied on oil.
“It is well known that Albania has Europe’s highest fuel prices and the worst fuel quality which is a much higher cost than the price itself. The Albanian economy risks getting asphyxiated exactly because of fuel prices,” says Gjergj Buxhuku of the Konfindustria Albania association.
Albania’s fuel prices have registered a hike this year, fuelled by a rise in international prices, lower domestic refining and an increase in the tax burden.
Diesel and petrol in Albania currently trade at 180 lek (€1.42)/liter, reflecting international oil prices hitting a three and a half-year high of around $80 a barrel, higher local license fees and lower domestic refining following the suspension of work at the country’s main refiner in early 2018 leading to a sharp hike in oil imports.
At €1.46/liter, Albania’s diesel prices were among Europe’s highest and the Western Balkan’s highest this week, significantly higher compared to neighboring Macedonia’s €1.12/l and Montenegro’s €1.35/l and even more expensive compared to Germany, Europe’s leading economy, at €1.32/l, according to the Global Petrol Prices portal.
Albania is a major oil producer but due to the poor quality and heavy refining needs of domestically produced oil, the Balkan country imports the overwhelming majority of its needs.
Media investigations have unveiled Albania has one of the region’s poorest oil quality, and almost everything goes unpunished despite a series of negative effects on the environment, pollution-related diseases and some 430,000 cars possessed by Albanians.
The fuel trading market, one of the country’s biggest industries, is represented by more than 1,000 fuel stations with an annual turnover of more than €1 billion, half of which goes in taxes that consumers pay in excise, circulation, VAT and carbon taxes.