* Albania bidding to fulfil century-old oil hopes
* Sector dominated by small players
* Shell-partnered drilling well could hit big
* Concerns over transparency, corruption
By Matt Robinson and Benet Koleka
BERAT, Albania, June 20 (Reuters) - In 35 years drilling foroil around the world, Leo Aubin says he's made a lot of moneyfor a lot of people. Now the stout, moustachioed Canadian findshimself in Albania, boring a hole 6,000 metres deep for theblack gold that the impoverished Balkan country has spent 100years hunting.
"We're very confident we're going to find what we're lookingfor," Aubin said at his drill rig, Shpirag II, in south-centralAlbania.
Petromanas, the small Canadian firm Aubin works for,has picked up where a string of oil majors left off in the early1990s, when the likes of Shell, Chevron andOccidental rushed to Albania as its borders flew openwith the collapse of Communism.
They had hoped to emulate the discovery almost a century agoby Anglo-Persian Oil Company, forerunner to BP, of one ofEurope's biggest onshore oilfields, Patos-Marinza.
Back then, an Anglo-Persian Oil director is said to havedeclared Saudi Arabia "devoid of all prospects for oil" and thatthe real play was in Albania.
History proved him wrong, but the quest to fulfil Albania'soil promise continues.
Occidental drilled Shpirag 1 in 2001, a short distance fromAubin's well, before heading for the exit with the other majors,scared off by Albania's breakneck and sometimes violent firstdalliance with capitalism and doubts over the commercial returnon its reserves of heavy oil.
Teaming up with Shell, Petromanas has pinned its hopes onthe same geological profile as southern Italy, across theAdriatic, where Eni and Shell are pumping 85,000barrels per day from the 500-million-barrel Val d'Agri field.
After investing almost $300 million, Petromanas expects toannounce its exploration results by September, potentiallyproviding a huge boost for the Albanian economy and placing thecountry of 3.2 million people alongside Romania in the top tierof Balkan oil producers.
GROWTH POTENTIAL
"Even if it's half of Val d'Agri, we're talking about morethan doubling the current production of the country," said GlennMcNamara, chief executive officer of Petromanas.
"We know the oil's there," he told Reuters. "The risk iscommercial rates. Can the reservoir deliver the rates we need todeliver a return on this investment?"
Shell's involvement reflects a revival of interest among oiland gas majors for European exploration, particularly in thelikes of Poland and Ukraine.
Albanian officials say the country has around 220 millionbarrels of 'proven and probable' oil reserves. They also expecta big oil and gas player to 'farm in' on London-listed San LeonEnergy PLC's offshore exploration of Albania's Adriaticshelf, which could yield significant gas reserves.
"Compared to well-established oil provinces, the opportunityis much less, but there is a lot of growth potential forcompanies willing to take risks," said Ivan Yakimov, an analystat the Sofia-based New Europe Corporate Advisory Ltd.
"If investors come with know-how, they can scale upproduction and increase recovery rates," he told Reuters.
Facing a tight-run election on Sunday, the country's fieryprime minister, Sali Berisha, says Albania is on the cusp ofrealising its potential. "Albania should be taken seriously interms of its oil resources," he told an energy conference in thecapital Tirana last month.
Ordinary Albanians have heard it all before and yet thecountry remains one of the poorest in Europe, the average wage ameagre 369 euros per month before tax.
Albania stirred interest with its low royalty rates andproduction-sharing agreements that McNamara described as "worldclass", but a number of disputes over exploration licences hashurt the investment climate in a country where corruption runsrife and politics often comes down to patronage and muscle.
The government's decision to cancel an agreement withU.S.-based Sky Petroleum in late 2011 raised eyebrows,though Albania won the case when the company took it toarbitration. Last year, Canada's Empire Mining halted operationsin Albania after its concession area was suddenly halved.
DISPUTES
In February, after accepting what oil sector professionalsconsidered a vastly overvalued bid from a little-knownAlbanian-U.S. firm for state-owned Albpetrol, the government hadto scrap it when the bidder couldn't make an initial payment.
Czech power group CEZ launched arbitrationproceedings last month against Albania after the country's powerregulator revoked the distribution licence of CEZ's local unitin a dispute over prices and imports.
Observers say the country's Economy, Trade and EnergyMinistry, which handles mining and oil contracts, was run as afief by the junior partner in Berisha's coalition government,the leftist Socialist Integration Movement (SIM), before theparty jumped ship in April ahead of the June 23 election.
Florion Mima, a Berisha ally who took over at the ministryuntil the polls, told Reuters he was too busy with a mountain ofpaperwork that included 47 disputed mining licences to beinterviewed. He did not respond to emailed questions.
Kastriot Bejtaj, an Albanian oil expert and former managerof Albpetrol, said the state's management of the sector was atbest ad hoc and had left exploration rights in the hands of anumber of small companies with little history in major oildiscoveries or the deep pockets to invest.
"If there's a strategy, it's not clear," he complained."We're losing time. We're losing time in exploration andproduction."
The problems echo those of European Union-member Poland,where foreign players interested in the country's promised shalegas riches have been unnerved by an uncertain legal andregulatory framework, red tape and environmental regulation.
Warsaw had high hopes of becoming a major source of shalegas for Europe and attracted the likes of Chevron and ExxonMobil to some of the 100 exploration licences it issued.
But Exxon, along with Canada's Talisman Energy andU.S. oil firm Marathon, quit after the country scaled down itsgas reserve estimates and early drilling proved challenging.
Professor Stavri Dhima, head of the petroleum regulatory andmanagement sector at the Ministry of Economy, Trade and Energy,denied Albania had lost time. In his ground-floor office, a messof maps, surveys and binders, he urged patience.
"An oil explorer is like a hunter," he said. "He knows thatin this region there are wild animals, but he doesn't kill oneevery time."
BP (BP.)
