January 20, 2016 / 9:04 PM / in 2 years

UPDATE 1-Albania to rewrite oil contract with Bankers Petroleum after tax tiff

* Albania says to renegotiate contracts with oil companies

* Wants to impose limit on cost recovery

* Companies only pay 50 pct profit tax after covering costs

* Albania in continuing tax dispute with Bankers Petroleum (Adds comment from Bankers Petroleum)

By Benet Koleka

TIRANA, Jan 20 (Reuters) - Albania will renegotiate its oil output-sharing contracts with Bankers Petroleum and other oil companies and impose a limit on expenses that can be used to offset their tax liability, Energy Minister Damian Gjiknuri said on Wednesday.

The Balkan state has accused corporations of understating profits made in the country to avoid its 50 percent profit tax. The dispute stems from a clause in the contracts that allows the companies’ operating costs to be set against the tax.

Gjiknuri said that Albania has not been paid any profit tax by the companies, only royalties.

Canadian firm Bankers Petroleum agreed to pay $57 million in instalments -- covering what Albania said was owed for 2011 -- so it could gain control of its Albanian bank accounts while it seeks a final solution through a third-party auditor or the courts.

“We shall renegotiate some of the current contracts, including Albania’s biggest contract -- Bankers Petroleum,” Gjiknuri told a meeting of the Extractive Industries Transparency Initiative (EITI), adding that the goal is to change the terms once some of the ongoing disputes over the profit tax have been settled.

Referring to Bankers Petroleum payments, Gjiknuri said the local agencies had worked hard to detail the real spending in the oil industry and to help to put a cap on the firms’ cost recovery.

Bankers Petroleum CEO David French said the company is in an open, working dialogue with the Albanian government on a number of items, primarily in relation to resolving the recent tax dispute.

“As an important contributor to the Albanian economy, the company will always be a part of discussions for a long-term framework of growth and investment in Albania,” French added in his statement to Reuters.

Bankers Petroleum extracts crude from the Patos Marinza oilfield, the biggest in Albania, and the Kucova oilfield.

In the contracts being negotiated with Royal Dutch Shell and Israeli’s Delek Group, Albania is imposing a ceiling on costs for the first time, Gjiknuri said.

“This means that a portion of the oil, before the company recovers the costs, will be divided for profit. The oil to be split between the state and the private entity will flow from the first barrel to help the state get more than now.” (Editing by Elaine Hardcastle and David Goodman)

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