* Albpetrol values its assets at $497 million
* Manner of privatisation to be decided at end-2010
PATOS, Albania, July 21 - Albania's state-owned Albpetrol will begin selling its own crude freely on the market, its general manager said on Wednesday, a step that is expected to strengthen the oil company ahead of its planned privatisation.
Ferdinand Murati said the change would end the monopoly of ARMO, which used to be the refining and trading arm of Albpetrol before it was sold two years ago and was by law required to buy Albpetrol's crude for five years.
Along with the state-owned electricity producer KESH, Albpetrol is one of the most valuable assets still in state hands and it is expected to be offered for sale later this year once a suitable formula for privatisation is found.
The government belatedly allowed Albpetrol the right to sell its crude after ARMO, which is facing technological issues, could not buy Albpetrol's stock of 60,000 tonnes of crude -- equal to its total storage capacity.
Albpetrol, owned 100 percent by the Albanian state, is profitable, Murati said. In 2009, Albpetrol had a profit of $3 million, the official said.
It produced 8,000 tonnes more crude in the first half of 2010 than planned.
After the sale of the crude oil, Albpetrol hopes to realise a profit of $2.5 million after paying taxes, third parties and employees.
The Albanian government has contracted Patton Boggs, a U.S. consultancy, to explore privatisation options for Albpetrol.
Most of Albpetrol's oil-bearing resources have been granted in 20-25 year concessions since 2004 to three foreign companies.
As a result, oil extraction in Albania has doubled from 350,000 tonnes in 2003 to an expected 700,000 in 2010.
Most of the activity is focused in the southern areas of Fier and Vlore.
"The privatisation must be different because at the same time the foreign firms will continue having concession agreements with Albpetrol while its assets will be offered to the market," Murati said.
"We had the first contact yesterday...and I think that by the end of December Patton Boggs will have identified the manner of the privatisation," Murati said.
Albpetrol has valued its assets, including its buildings, above and below ground infrastructure, the crude transport system and wells at $497 million dollars, Murati added.
"As the manager of Albpetrol, I do not favour a full privatisation because this is a strategic sector. We have to look at the options and after considering all of them, I will have to say which one I favour," Murati said.