Italy: Orca sees progress toward Po, offshore drilling

By OGJ editors

Land and offshore drilling is poised to go ahead in Italy, said Orca Exploration Group Ltd., Dar es Salaam.

Northern Petroleum PLC, operator of the Longastrino block in northern Italy’s Po Valley, is to spud the La Tosca well in August 2012. Orca will pay 100% of the cost of La Tosca-1 well up to €4.3 million and 70% thereafter for the drilling phase, together with back-in costs of €0.6 million to earn a 70% interest in the block.

If the well is tested and completed, Orca will earn a further 5% by paying 100% of testing costs up to €1.3 million and 75% thereafter. The block has a number of other prospects that will be evaluated after La Tosca is drilled, Orca said.

Meanwhile, Petroceltic International PLC is moving ahead with the Elsa appraisal opportunity offshore Italy following the Italian government’s June 26 proposal of certain changes to offshore drilling restrictions imposed in mid-2010.

The new decree states that the drilling ban will now apply to activities up to 12 miles offshore, whereas previously the exclusion zone was 12 miles from marine parks and 5 miles from other coastal areas. Importantly the restrictions no longer apply to existing licenses, either exploration or production.

The decree also included a provision for a 3 percentage point hike in royalty rates payable on offshore production to 7% to be allocated to state budgets to support environmental oversight. This represents a degree of fiscal tightening, but Orca noted that Italy’s tax regime for oil and gas producers remains among the most favorable worldwide.

The decree is effective immediately and must be ratified by parliament within 60 days. During this process the decree can be amended, but major changes are generally seen as unlikely. It is expected that this will have positive implications for the Elsa appraisal project, currently on hold.

Assuming the decree becomes law as stated, Orca said, it is expected that drilling could start in mid-2013 after the completion of an environmental assessment study by Petroceltic.

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