Is there still hope for Italy’s oil and gas sector and the small caps involved in it?
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In February last year, Italy dropped a bombshell by imposing an 18 month suspension on oil and gas operations due to environmental concerns.
One small cap, Po Valley Energy (ASX:PVE), claimed at the time that this moratorium wasn’t applicable to them because its project was advanced enough through the approvals process.
Today Po Valley announced it had won formal technical environmental approval for its Selva gas field development.
This is not the final step, but what remains is a fait accompli (a done deal); namely a final sign off by the government and grant of a production concession.
The low cost Selva project has gas reserves of 13.3 billion cubic square feet and it will serve the domestic gas market.
CEO Michael Masterman told Stockhead this was a major step for the project which will help reduce Italy’s reliance on imports.
“Selva is a high return, low capital expenditure project and we’re keen to get it into production,” he said.
“It’s probably one of the largest gas provinces in continental Europe and transport costs are negligible.
“Italy is highly reliant on imported gas so domestic is the best market – we have a connection to the national grid 1km away so we’ll sell directly into the market.”
Just over halfway into the moratorium, attention has died down. However as expiration looms interest increasing again will be inevitable.
The moratorium is extendable by another 6 months – to 24 months. But without further action by that point the moratorium will simply expire and presumably activities will resume.
Nevertheless the whole basis of the halt was to allow the government time to make a plan to become more energy efficient and less carbon intensive.
The other ASX small cap affected is ADX Energy (ASX:ADX) which has a project in the offshore Nilde oil field. ADX also has assets in Romania, Austria and Tunisia.
In its most recent investor presentation it simply noted progress in Italy was stalled due to the moratorium while boasting of its success in Austria and Romania.
Nevertheless, it clarified a farm-in deal it secured prior to the moratorium with SDP Services remained in place.
This would fund over 20 million euros ($32.3 million) of development and give SDP a 50 per cent interest.