Dolce vita toughens for Italy

With UK analysts Wood Mackenzie Consultants Ltd. reporting largely static production levels in the Italian oil and gas sector over the last 2 years, ENI SPA's last-minute bid to take over Lasmo PLC in December the latest step in company plans to build up its international portfolio while boosting its total output toward the 1.5 million boe/d mark (see related story, p. 24)-is looking to have been timely.

With UK analysts Wood Mackenzie Consultants Ltd. reporting largely static production levels in the Italian oil and gas sector over the last 2 years, ENI SPA's last-minute bid to take over Lasmo PLC in December the latest step in company plans to build up its international portfolio while boosting its total output toward the 1.5 million boe/d mark (see related story, p. 24)-is looking to have been timely.

On the Italian oil and gas company's home patch, exploration and appraisal activity during 1998-2000 has, according to WoodMac figures, done no more than remain on par. Onshore, as the year wound down, 13 E&A wells had been completed or were under way, equal to the number completed in 1999, but, crucially, without any significant finds being made despite the shift in exploration from southern to central and northern Italy.

Exploration languor

Activity was no more vigorous offshore. Six exploration wells had been completed or were in progress by yearend, again mirroring numbers from the year before. The only ray of light came from the Ionian Sea, where a "mini-revival" of interest led to three wells being spudded, with ENI making one new gas discovery-Fausta-1. In the Adriatic, where the other three wells were drilled, the Italian company found gas with Arnica-1.

There has, however, been an upward swing in development drilling in the Italian sector, with some 35 wells completed or under way as of November, up 10 wells on 1999 figures. Naturally, ENI can take credit for most of this drilling activity, which was focused on the Clara gas complex in the Adriatic, and the onshore Val d'Agri and Tempa Rossa oil fields. Company plans for the 15-field Alto Adriatico project remain in limbo after the government stymied further development due to fears that gas production from the area would deepen nearby Venice's already serious subsidence woes.

Given the languid E&A activity in Italy, WoodMac predicts production levels for 2000 to be much as the year before. Forecasts are for oil output of 102,000b/d, up fractionally from 1999, with gas production of some 1.670 bcfd compared with 1.706 bcfd in 1999.

Pipeline hopes

Unlike these rather lackluster figures, however, new oil and gas export pipelines planned for the southern Apennines-home to 90% of the country's remaining oil reserves-continue to attract foreign attention. ENI is still waiting on regional approval of a 136-km, 150,000 b/d pipeline linking Val d'Agri to its Taranto refinery, which, once built, could open up the area to the development of smaller fields. And if Val d'Agri is found to hold considerably more oil than the presently proved 600 million bbl, stresses WoodMac, construction of a second pipeline could be justified.

Even though ENI has kept its shoulder to the wheel developing new fields in the Adriatic over the last year, Italy's domestic oil and gas sector still needs a number of significant new finds to stave off a sharp decline in development in the medium term.

And with the Italian oil and gas company clearly signaling its aim to devote more time to developments further afield, the outstanding hope of generating outside interest in Italy's niche upstream sector rests with those southern Apennines developments that prove "sufficiently attractive" to warrant foreign investment.

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