Ready for prime time

May 1, 2015

Italy is sitting on sizeable untapped gas resources, yet it still imports a large proportion of its gas. Elaine Maslin reports from the Offshore Mediterranean Conference, Ravenna.

Bruno Lescoeur, CEO Edison. Photo from Edison.

Chastened by low oil prices, the global oil and industry is in something of a pensive mood. In Italy, however, the mood is driven more by an eagerness to open up and exploit the country’s own resources, particularly offshore.

Bordering Italy’s maritime boundaries, Greece, Croatia and Montenegro have been encouraging offshore exploration through licensing rounds (Croatia’s first was opened last year) and Albania, too, has seen seismic acquisition activities to scope out its resources. Major finds offshore Israel and Cyprus have been in the headlines, albeit more recently due to project cancellations and geopolitical tension.

Italy, meanwhile, has the fifth largest proved reserves of crude oil in Europe with 560 MMbo as of 1 January 2014, and it is sitting on the sixth largest gas reserves in continental Europe (at 2.1 Tcf), according to the US Energy Information Administration. However, regulatory bureaucracy and drilling bans means the resources are being left underexploited, operators and industry organizations complain, and the country is the second largest natural gas importer in Europe.

Italy’s ability to tap its resources also has broader implications. By tapping its own resources, Italy and Europe could lower their reliance on imports, increasing energy security, Bruno Lescoeur, CEO of Italian exploration and production company Edison, told the Offshore Mediterranean Conference (OMC 2015) in Ravenna.

Marcelo Masera, Head of the Energy Security Unit in the Institute for Energy and Transport of the European Commission’s Joint Research Centre (JRC). Photo from Elaine Maslin. 

“The EU is rightly concerned about its energy security and the Mediterranean could contribute,” says Lescoeur. “There are opportunities, for exploration and production, as well as pipelines, but also geopolitics,” he said, referring to Israel and Cyprus, the Ukraine and Russia, from which Italy gets a lot of its gas, as well as the instability in North Africa, from which Italy imports a large amount of its oil. “The Mediterranean needs to become a hub for increased sustainable production.”

However, no exploration wells have been drilled in Italy’s offshore since 2008 (a drilling ban was imposed in 2010 following the Deepwater Horizon disaster in the US Gulf of Mexico) and there are no incentives to change this, only disincentives and regulatory bureaucracy, “The whole system has to be improved right down to the bottom,” he says.

“The situation in the Adriatic is a paradox: Croatia has assigned its marine areas for oil and gas exploration while Italy is a mere onlooker, at activities carried out just miles away,” says Guido Ottolenghi, President of the Confindustria Ravenna, Italy’s offshore industry hub.

Northern Petroleum has suffered from such delays. It recently issued an update on its southern Adriatic Sea acreage offshore Italy. The company said there had been little opportunity to discuss ongoing activities due to lack of “tangible progress,” primarily relating to an application to carry out 3D seismic acquisition across the Giove oil discovery (1998) and Cygnus exploration prospect. The application process started in 2012 and without the 3D seismic the firm is unable to move ahead with exploration drilling.

The award of a new license in the Sicily Channel to Northern last year had, however, given the firm hope that the Italian administration was actively progressing approvals “that had been outstanding for some years.” Further hope has been given by a decision in February to rescind an additional 10.5% tax imposed on the industry since 2008, the so-called Robin Hood tax, as described by Lescoeur.

In 2013, a new area to the west of Sardinia, called Zone E, was opened to exploration by the Italian government. Some research on the area, which covers part of the Balearic Sea and Alghero Province Sea, with waters as deep as 2800m, has been carried out. According to a presentation at OMC 2015, the area contains Messinian reservoir rock and Oligo Miocene source rock. “There’s not a lot of data because it’s an under explored area,” OMC was told. Just two offshore wells have been drilled, one 1800m deep, which reached the Miocene and Oligocene, and a second 1700m deep. According to the US Geological Survey, the area could contain 1.4 Tcm gas and 0.42 billion bbl oil, she says. There is interest from operators in the area, she says, but for now little activity.

The situation is frustrating not only for Italian explorers, but also Italian contractors, who are hopeful they could secure work in Italy’s offshore. Saipem, Italy’s most well-known offshore contractor, currently has virtually no activity offshore Italy at present and some of the traditional areas where the country’s contractors look for work have been suffering from local tensions and even conflict.

Italy has had close ties with Libya and Egypt in North Africa, both importing hydrocarbons from both and providing services. Due to the tensions in both countries, resulting in a drop in oil output and activity, contracts have waned, if not dried up altogether, a situation further exacerbated by the low oil price.

The standing room only opening plenary session at OMC 2015.Photo from OMC. 


Regulation around offshore safety is also high on the agenda for the Mediterranean basin. EU member states have until 19 July this year to transpose into legislation new rules around offshore safety, this includes splitting the licensing and regulatory functions, integrating environmental protection measures into operator’s safety case, common forms for incident reporting and measuring safety performance, outlined Marcelo Masera, Head of the Energy Security Unit in the Institute for Energy and Transport of the European Commission’s Joint Research Centre (JRC).

While North Sea bordering countries already mostly conform to the proposals, drawn up in the wake of the Deepwater Horizon disaster in the US Gulf of Mexico, the situation is more complex in the Mediterranean.

At the moment, coordinated rules around offshore operations and regulations in the Mediterranean Sea, with many more bordering countries than the North Sea, including non-EU member states, are lacking, Lescoeur says.

“The only common rules are the ones the IoCs are imposing by themselves to their own activities,” he says. “These companies are applying international best practices. We also need to change public perception. Almost all activities are seen as dangerous and polluting.”

Getting offshore safety right – or not – could have significant consequences, on human life, the environment and financially, Masera says.“Macondo was an alarm bell to the serious consequences (of an accident offshore) - casualties, environmental issues and financial consequences. It is not just a technical issue. This could hurt industry and all these energy scenarios,” Masera says.

“Providing a solution is not easy. There is no silver bullet. The point is creating the right balance between industrial legislative measures that can ensure the best possible efforts are taken. 

“In the EU, we have to deal with this. Eighteen months ago the European Commission proposed a directive that member states have until 19 July to transpose into legislation. News about progress and difficulties in this transposition will be heard then.

“We are dealing with complex industrial systems. Any technical system fails. We cannot be naive on this. The preventative analysis and learning from this is a key issue. The position that this cannot happen to us is unacceptable. This has to be tackled from the beginning.” 

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