Dutch energy giant Shell has decided to withdraw from Block 4 in southern Albania, suspending all other oil extraction operations in the country and considering a complete cessation of its activities.
According to its audited financial statements for 2023, published belatedly at the beginning of this year, Shell Albania Block 4 B.V. - Albania Branch confirmed that its management evaluated the operational situation in Albania in early 2024. As a result, the company declared, “Based on the management's decision, there is no intention to continue business activities in the foreseeable future. Liquidation of the Branch is expected to begin in 2025.”
Shell Albania Block 4 B.V. was responsible for oil exploration in Block 4, which covers Albania’s southern and southeastern regions. The company obtained exploration rights through a decision by the Council of Ministers in June 2018. The contract included three exploration phases, originally projected to last a total of seven years. However, due to disruptions caused by the global COVID-19 pandemic and energy market instability, Shell suspended operations in Block 4 in 2022 for a maximum period of two years.
By the end of 2023, the company had accumulated losses amounting to approximately €25 million, mainly attributed to exploration costs. In 2023, company executives decided not to enter the second exploration phase and ultimately terminate all operations in Block 4.
High Costs and Challenges in Shpirag’s Oil Reserves
Shell Upstream Albania B.V., the company overseeing the primary oil exploration operations in Albania, particularly in the Shpirag region, is facing a similar situation. In its 2023 financial statements, the company announced that it no longer considers the Albanian branch as a viable operation.
Furthermore, Shell Upstream Albania decided to write off exploration wells for a total of over €500 million. Writing down an asset effectively acknowledges it as a loss. This action suggests that Shell Upstream Albania has no expectations of extracting or commercializing oil from these wells for economic benefit.
As a result, the company reported a record pre-tax loss of 54.8 billion ALL (€1.1 billion) for 2023, bringing its total accumulated losses to 108.6 billion ALL.
Future Uncertainty and Potential Complete Withdrawal
At the start of 2024, testing at Shpirag-5 concluded with results that discouraged further assessment. Following Shell Upstream Albania’s decision to halt further well testing, the company is now evaluating various options for the future of its assets in Blocks 2-3. The asset write-offs reflect the uncertainty surrounding commercial viability and potential recovery of value.
The financial statements further indicate that the company no longer considers its Albanian branch as a going concern. However, it expects funding for decommissioning and restoration obligations, as well as outstanding commercial liabilities, to be provided by Shell Treasury in London, in line with the Group’s internal policies.
This signals a likely permanent withdrawal of Shell’s operations from Albania, marking a significant shift in the country’s oil exploration landscape.