Yesterday, the Italian Ministry of the Environment revealed plans to restrict offshore hydrocarbon activities around its coastline. The Italian Minister of Environment, Stafania Prestigiacomo, announced an outline proposed decree to amend the Italian Environmental Code, to ban drilling within 5 miles of the Italian coastline and 12 miles around designated, protected marine and coastal areas.
This morning a number of UK-listed oil and gas explorers updated investors on how the proposal may, or may not, affect their projects in the region, should the proposed decree become law. Northern Petroleum, Petroceltic International, and Mediterranean Oil & Gas, three junior oil and gas companies operating in Italy, all issued statements.
Northern Petroleum told investors that its preliminary examination of the proposals suggest that it will “not affect Northern's reported reserves in Italy or the exploration prospectivity of the Southern Adriatic, and has limited or no effect upon most other areas including the West of Sicily Thrust Belt”. The company highlighted that the majority of its permit areas are further offshore beyond the proposed restrictions.
Northern Petroleum MD Derek Musgrove commented: “It is not surprising that the Italian government would have some reaction to events in the Gulf of Mexico and now we can move forward with their views having been expressed." The company also highlighted that “a reaction to an oil well blow-out and resultant spill should not apply to gas in the same way."
"I believe we are not badly affected save in the Ionian Sea, not our most significant core area. We have always conducted ourselves with due consideration to marine parks, sensitive coastal areas and the environment in general.”
In the Southern Adriatic - with 2 permits, 3 preliminary awards and 4 applications - the effect is extremely minor in aerial extent and there is no effect on established reserves or exploration prospectivity, the group said.
In the West of Sicily Thrust Belt - 6 permits, 4 preliminary awards and 1 application - there is a minor aerial effect upon only one of the six blocks, although the company said that further study is required before an assurance can be given that it has no effect on any prospects being developed. “The proposals could have effect upon a significant part of two of four applications in the area (d21G.R-.NP and d25G.R-.NP),” the company noted that a more detailed examination is required.
In the Sicily Channel - 2 permits, 2 preliminary awards and 3 applications - Northern Petroleum highlighted that there would be no effect upon “the very large” Vesta prospect. Whilst the area north of Pantelleria Island would be affected, the company believes that two prospects in the area remain unaffected, and only a partial effect applies to three further prospects.
Closer to the coast of Sicily, where Northern has four applications, one (d30G.R-.NP) would be entirely unaffected, on another (d358C.R-.EL) the area of greatest interest would not be materially affected, and on the third (d29G.R-.NP) sufficient structural leads remains unaffected. The company said that the fourth (d347C.R-.NP) will require a more detailed review before it could comment.
The company acknowledged that the greatest effect would be to its interests in the Ionian Sea - 3 preliminary awards and 2 applications - as the new proposals would rule out most of the area of two preliminary awards (d59F.R-.NP & d64F.R-.NP), but the third (d77F.R-.NP) is entirely unaffected. The effects of the remaining areas are considered minor.
The Irish oil and gas company said that its exploration and development work on the Elsa structure could be affected by the proposal. “Petroceltic understands that should this restriction be passed into law it will apply to permit applications currently pending and is likely to include Petroceltic's current location for Elsa 2. This well was scheduled to spud in Q4 2010.”
“The Elsa structure straddles the proposed 5 mile restriction and therefore Petroceltic are considering alternative well locations on the structure which are outside of the proposed 5 mile boundary.”
The company said it is currently seeking further clarification on the process for adopting or rejecting this outline decree and the validity of the application of an immediate restriction to drilling operations. Petroceltic also emphasised that it still intends to continue with the existing environmental permitting process, which is at an advanced stage, whilst the implications of the proposed restrictions are assessed.
"We are keenly aware of the environmental concerns associated with drilling in the Abruzzo region and have been diligent in communicating to stakeholders our plans to mitigate environmental risks when drilling the Elsa 2 well. This has been done through the official permitting and consultation process and additionally through a voluntary supplemental communication initiative”, Petroceltic chief executive Brian O'Cathain said.
“We are committed to maintaining this partnership approach in the months ahead."
Should the proposed change to the Environmental Code come into force, Petroceltic intends to seek agreement from the Ministry of Industry to suspend any licence timing obligations, in order to extend the well spud deadline.
Mediterranean Oil & Gas
The company has confirmed that the proposal may apply to permit applications currently pending and may apply to the Ombrina Mare project.
The Ombrina Mare reservoir structure is located within the proposed 5 mile exclusion zone, and MOG told investors that it is now reviewing alternative potential well locations outside the 5 mile exclusion, zone in case the legislative decree applies to the current platform at Ombrina Mare.
"The company will carefully analyse the text of the decree once it is published and will update the market when the implications have been assessed,” chief Executive Sergio Morandi commented. “MOG will continue to work closely with environmental and local authorities and the Italian government, to progress the Ombrina Mare project."
MOG said it will continue to monitor the position closely.