The Group has a portfolio of exploration permits and applications which have the potential to generate high returns on investment over the medium to long term. The portfolio is focused offshore in the southern Adriatic and onshore in the Po Valley region.
Cabot has been active in the Italian oil and gas industry for over 10 years. The Company has drilled two exploration wells onshore and acquired a number of 2D and 3D seismic surveys over that time and has established ownership of high quality acreage, which has been validated by the farm in of two partners in the last two years. Shell Italia farmed into the Cascina Alberto permit onshore in the Po Valley region and High Power Petroleum, subject to regulatory approval, across all the southern Adriatic permits and applications. The Company also has offshore permits in the Sicily channel, close to the prolific Vega field operated by Edison.
Italy benefits from a well established oil and gas industry that is in a relatively early phase of the industry life cycle when compared to other European peers. The country also has a fiscal system that attracts investment and an extremely good hydrocarbon system that has been proven to work throughout the onshore and offshore. The pace of development for the industry in the country has proven to be slower than counterparts due to a lengthy environmental impact assessment process, however when work programmes are approved progress can be made executing the work in a reasonable time frame.
The Company will create three to five significant well events in Italy over the medium to long term to expose shareholders to the possibility of significant upside upon success of any one event.
Cascina Alberto – onshore Po Valley
Shell Italia, as operator of Cascina Alberto, is undertaking an exploration campaign targeting a prospect analogous to the prolific Villa Fortuna Trecate oil field, which is located approximately 25 km away and has produced over 220 mmboe to date. Shell Italia is effectively carrying the Company through to the end of the first exploration well.
During 2017 the operator conducted an in depth public consultation about a proposed 2D seismic survey campaign, and then submitted a detailed environmental impact assessment for the survey. This will then be followed with survey planning and a target execution date in early 2019. Once the survey is completed the data will be processed and interpreted to determine whether the previously identified prospect is still attractive to drill.
The Company has a 20 per cent. interest in the permit, which is carried for 2D seismic operations up to $4 million and for the drilling of a single exploration well up to $50 million.
Permits F.R39 and F.R40 – offshore southern Adriatic
In the Italian southern Adriatic, the Company has a 100 per cent. interest in two permits, F.R39.NP and F.R40.NP and in five contiguous permit applications. There are three existing oil discoveries within the permits area, Giove, Medusa and Rovesti. There are also a number of leads and prospects, the most exciting of which is the Cygnus prospect, which has 401 mmboe of prospective resource assigned to it. The Company is aiming to acquire 3D seismic over Cygnus and the 26 mmboe contingent resource Giove oil discovery. Based on the results of this seismic data, the Company will then aim to drill an exploration well on Cygnus and an appraisal well on Giove, which now only needs a flow test to surface before a development plan can be finalised.
Subsurface work conducted during 2016 identified that the Medusa deep exploration prospect is analogous to the Giove discovery. As a result, subject to the approval of the Ministry of Economic Development, the Company is proposing to combine the work programmes for permits F.R39 and F.R40. This will allow one well to move both permits into the second licencing period. The Company has drafted an appraisal well Environmental Impact Assessment for Giove to be submitted during 2018 to drill a well 12 to 18 months after submission, subject to financing and approvals being received. All offshore permits are currently held in suspension pending approvals for the next stage of the work programmes.
A farmout of 10 per cent. of the whole area has been agreed with High Power Petroleum, which is now subject to regulatory approval. High Power Petroleum also have an option to increase their ownership to 50 per cent. by funding the costs of an appraisal well on the Giove discovery, up to $15 million.
Permits C.R146 and C.R149 – offshore Sicily channel
The Company has two permits, C.R146.NP and C.R149.NP, located offshore in the Sicily channel that contain the Vesta exploration prospect along with other smaller exploration leads. The Vesta exploration prospect comprises of platform shoal carbonates with significant hydrocarbon prospective resources and is analogous to the currently producing Vega field, operated by ENI.
The target reservoirs are in the Liassic and Triassic formations within the Streppenosa / Ragusa basin and are located in approximately 120m of water. The basin has a prolific hydrocarbon system, proven in many nearby fields with high quality source rocks and proven, effective seals. Internal estimates consider the mean unrisked prospective resource in Vesta to be 430 mmboe.
The C.R146 permit is currently in suspension as the Company has applied for an environmental risk assessment to drill a well on the Vesta prospect, which is being considered by the Italian Ministry of Environment. The permit was applied for by the Company as it is believed that the Vesta prospect extends into C.R149. The permit was awarded in July 2014 with a first exploration period of six years. The Company is looking for partners to help progress the work programme offshore Sicily.
Aglavizza production concession – onshore southern Italy
In June 2017, the Company announced the acquisition of certain onshore production assets from Rockhopper Exploration Plc. The assets comprise a 100 per cent. interest in the Aglavizza production concession which contains the producing Civita gas field and associated processing facilities and pipeline, a local operations base, and the following production concessions, containing suspended wells, and an exploration permit:
- Scanzano Concession (100 per cent. interest)
- Torrente Celone Concession (50 per cent. interest)
- Monte Verdese Concession (60 per cent. interest)
- San Basile Concession (85 per cent. interest)
- Civita Permit (100 per cent. interest)
Civita, which is tied into the national gas network, was commissioned in late 2015 and averaged gas production of 130 barrels of oil equivalent per day during 2016 and 2017. The field is estimated to contain approximately 1 bcf of recoverable gas according to internal estimates. The Company is reviewing the potential for the redevelopment of the Cupoloni field in the Scanzano Concession and the further subsurface potential of the Vigna Nocelli field in the Torrente Celone concession.
The acquisition is subject to inter alia Italian regulatory approval and is expected to occur later in the year. The acquisition has an economic effective date of 1 January 2017.