{"id":21746,"date":"2025-02-02T16:50:00","date_gmt":"2025-02-02T15:50:00","guid":{"rendered":"https:\/\/altax.al\/?p=21746"},"modified":"2025-05-16T17:02:08","modified_gmt":"2025-05-16T15:02:08","slug":"why-have-subsoil-resources-not-justified-the-focus-and-how-should-they-be-oriented-in-2025","status":"publish","type":"post","link":"https:\/\/altax.al\/en\/why-have-subsoil-resources-not-justified-the-focus-and-how-should-they-be-oriented-in-2025\/","title":{"rendered":"Why have undergorund resources not justified the focus and how should they be oriented in 2025?"},"content":{"rendered":"\n

Albania’s subsoil resources, including oil, natural gas, and minerals such as chromium, copper, and iron, have significant potential to contribute to economic development. However, these resources have failed to deliver the expected outcomes for the Albanian economy. This is due to a series of factors related to management, transparency, and the lack of a sustainable development strategy.<\/p>\n\n\n\n

Albania possesses important oil and gas fields<\/a>, such as those in Ku\u00e7ov\u00eb, Patos-Marin\u00ebz, Gorisht, and the newer ones in Shpirag. The oil industry constitutes a significant portion of exports. The country also has various mineral deposits<\/a> and is one of the leading exporters of chromium in Europe, as well as holding substantial reserves of copper and nickel.<\/p>\n\n\n\n

Water reserves <\/a>represent another important asset for electricity production.<\/p>\n\n\n\n

In theory, these resources could be a key pillar for economic growth and industrial development.<\/p>\n\n\n\n

However, issues in resource exploitation, such as poor management and lack of transparency, have directly impacted the low profitability in terms of budget, environment, and public welfare.<\/p>\n\n\n\n

Many of Albania’s natural resources have been granted under concession to private companies, often under conditions that do not bring direct benefits to the national economy. For example, the oil industry has often benefited private operators more than the state budget.<\/p>\n\n\n\n

Even though Albania has large natural reserves, their contribution to GDP and public revenues remains limited. The absence of a proper taxation system and frequent avoidance of obligations by companies are recurring problems.<\/p>\n\n\n\n

The mining and oil extraction industries are still based on outdated technology, which affects the sector\u2019s efficiency and profitability. In many cases, resources are exploited without long-term planning, leading to environmental degradation and the loss of future potential. In areas where resource extraction activities are conducted, communities often face serious environmental problems, such as water, land, and air pollution, while economic benefits are not directly felt. Illegal activities or exploitation without environmental controls have damaged important landscapes and ecosystems.<\/p>\n\n\n\n

Albania has not followed a clear, consistent strategy for the development of subsoil resources as part of a sustainable economic plan. Most activities are related to the export of raw materials rather than creating added value domestically (e.g., mineral processing).<\/p>\n\n\n\n

Why Have the Resources Not Delivered the Expected Economic Results?<\/strong>
The oil and mineral sector should be one of the main revenue sources for the Albanian economy. However, a range of issues has affected its sustainable development and the maximization of benefits for the state budget.
Below are some of the main challenges hindering the growth and effective management of this sector:<\/p>\n\n\n\n

In some cases, funds that should have been invested in the development and modernization of the mining and hydrocarbon industries have been misused or used ineffectively. This includes failed projects, investments in outdated equipment, and lack of investment in research and development. As a result, the infrastructure remains inadequate, making the extraction and processing of raw materials more expensive and less efficient.<\/p>\n\n\n\n

Decisions on granting mining licenses are often made based on political grounds rather than professional criteria. Tendering and licensing processes have been criticized for lack of transparency, favoring companies with specific interests, often to the detriment of fair competition and economic efficiency. This situation has resulted in insufficient investments and mismanagement of mineral reserves. Many concession agreements have been negotiated in such a way that Albania\u2019s benefits are minimal. These contracts are often covered by trade secrets, limiting public oversight.<\/p>\n\n\n\n

Uninterrupted exploitation without a regeneration strategy has caused some important mineral reserves to deplete rapidly. For example, the production of chromium and copper has declined due to lack of long-term planning and investment in technology that could ensure more efficient and sustainable exploitation.<\/p>\n\n\n\n

In some cases, the concentration of minerals in the remaining reserves is low, making extraction less profitable. When a mineral has a low concentration, extraction and processing costs are higher, making the sector less attractive to investors. Consequently, many of these reserves remain unexploited or are exploited inefficiently, resulting in missed opportunities for higher revenues for the national economy.<\/p>\n\n\n\n

Albania mainly exports oil and minerals in unprocessed form, missing the added value that could be created through processing and industrial production. For example, exporting chromium in unprocessed form yields much less revenue than producing steel.<\/p>\n\n\n\n

The oil and mineral industries have played a significant role in the Albanian economy in recent years. Although this sector constitutes a considerable source of income and exports, its impact on the state budget does not always reflect the high production value. To better understand this phenomenon, it is necessary to analyze production and fiscal contribution data for recent years.<\/p>\n\n\n\n

According to INSTAT data<\/a>, crude oil production in 2022 was 902,064 tons, marking a significant increase from 2021, when 697,662 tons were produced. The sales value for oil reached 44.8 billion ALL, an increase of 31.2% compared to the previous year. In the minerals sector, the production of chromium ores and concentrates in 2022 was 1,399,017 tons, with a sales value of 30.9 billion ALL. These indicators suggest a strong production industry, but one that does not reflect a significant contribution to the state\u2019s fiscal revenues.<\/p>\n\n\n\n

During 2023<\/a>, oil production was 891,400 tons, while crude iron and steel production was estimated at 474,444 tons. Also, the production of chromium ores and concentrates reached 822,206 tons, while produced cement amounted to 2,176,865 tons. The sales values for these products were 39,280 million ALL for oil, 33,116 million ALL for iron and steel, 20,359 million ALL for chromium, and 19,387 million ALL for cement. These figures demonstrate a high-volume industry, but its contribution to the state budget remains limited.<\/p>\n\n\n\n

Despite these high production and sales levels, the oil and mineral sector contributes only 10.1% of total profit tax. This implies that declared profits by companies are relatively low or that there are mechanisms minimizing their fiscal burden. In terms of social insurance contributions and payroll taxes, this sector represents only 7.5% of total tax and customs revenues, suggesting that the number of registered employees may be lower than expected, or that wages in this industry do not reflect actual profits.<\/p>\n\n\n\n

Another important revenue source for the state budget is the mining royalty, which constitutes only 10% of national taxes and 1.1% of tax and customs revenues. This indicates that there is room to revise royalty policies, increasing the rates companies pay for the exploitation of natural resources. On the other hand, the VAT collected from this sector represents only 2% of the total VAT, a low percentage that may be explained by favorable tax schemes for investors or various fiscal exemptions.<\/p>\n\n\n\n

This analysis clearly shows the need for a review of fiscal policies in this sector. Increasing mining royalty rates, strengthening controls over profits and taxes paid by companies, and encouraging the processing of raw materials domestically could help the oil and mineral industry have a greater impact on the state budget. These measures would contribute to a fairer distribution of benefits from natural resources, ensuring more sustainable economic development for Albania.<\/p>\n\n\n\n

The oil and mineral industry in Albania has had a significant impact on the country’s economy. However, despite its great potential, management challenges, favorable fiscal policies for concessionaires, and lack of investments in technology have limited this sector\u2019s long-term economic impact.<\/p>\n\n\n\n

One of the main problems is the inefficient use of public funds, where investments that should have gone into modernizing the sector have often not been used properly. Clientelist ties in granting mining licenses have created an environment where decisions are made on political grounds, undermining efficiency and transparency. These issues have also contributed to the depletion of some reserves, such as chromium and copper, which have been exploited without a regeneration plan, making their extraction increasingly less profitable.<\/p>\n\n\n\n

A long-term strategy focused on increasing added value and improving the management of natural resources can bring significant changes. This would be enabled through:<\/p>\n\n\n\n