* Decree passed this month imposes 12-mile ban around coasts
* New measure halves area open to exploration
* Small players say they lack resources for deep water areas
By Stephen Jewkes and Oleg Vukmanovic
MILAN/LONDON, Sept 24 Italian environmental
regulations will halve the area available for offshore oil and
gas exploration and push it out into deep waters where
independent producers lack the cash to operate, leaving bigger
players to call the shots.
Italy has sought to lure small foreign oil and gas producers
to drill offshore, to help stimulate stagnating output that has
contributed to higher energy bills and dependence on imports.
But the changes introduced by decree early this month - to
impose a 12-mile ban around coasts, shut down the Tyrrhenian sea
east of Sardinia and focus on areas with high potential and low
environmental impact - left smaller players cold.
"It's no attraction for us," said Giuseppe Rigo, chairman of
Calgary-based CYGAM Energy, referring to a new area the
government is offering to the west of Sardinia.
"It's deepwater, and research there is expensive, and we
don't have the means. It's a new area for the big guys."
This month's decree means a cut in offshore acreage to
139,000 square km from 255,000. New areas have been opened up,
notably near the Balearic Islands west of Sardinia.
"The Balearic area is around 2,500 metres deep. Too deep for
small developers who will have to go there in joint ventures
with bigger peers," said Pietro Cavanna, managing director of
Italian oil industry association Assomineraria.
Oil major Eni and Edison, controlled by French
utility EDF, are offshore leaders. Anglo-Dutch major
Royal Dutch Shell and France's Total are also
active in the region.
Italy's Industry Ministry has said the new areas have drawn a
lot of interest - especially the acreage off Sardinia straddling
waters already developed by France and Spain.
"A series of U.S. companies have been in contact with the
ministry expressing great interest and asking when the decree
was coming out," a senior source at the ministry said.
Opinions differ on just how much oil and gas Italy is
sitting on but excitement over a gas bonanza in the Eastern
Mediterranean and the billions of dollars in revenues Cyprus and
Israel could generate has kindled interest in Italian waters.
Italy has total oil and gas reserves of around 700 MTEP
(million-ton equivalent of petroleum), compared to current
annual production of just 12 MTEP, and is looking to double
domestic oil and gas output by 2020.
Former Industry Minister Corrado Passera estimated that
doubling production could generate investments of 15 billion
euros ($20 billion) and cut the energy bill by about 6 billion
Imports account for around 90 percent of Italian energy
demand and with nuclear power banned, shale gas off the agenda
and renewable energy incentives limited, the country is
uncomfortably dependent on gas supplies from Algeria, Russia and
Libya - all of which have suffered disruptions in recent years.
While the new decree has cleared up a confusing tangle of
previous regulations, some investors said it has failed to
tackle Italy's chronic red tape that has caused them years of
"I think offshore Italy is a very difficult place to do
business. The laws keep changing and there's a lot of local
opposition. I think it would be a pretty confident move now to
be buying into offshore with all the risks on permitting and
rules," said James Parsons, CEO of UK-based Sound Oil.
Italy's complicated and, at times, arbitrary regulatory
environment means several different permits may be required from
both central and regional governments before clearance is given.
A separate decree issued last week, aimed at attracting
foreign investors, acknowledged the impasse and said the
government would seek to streamline the permitting process.
But operators remain skeptical. "They've been talking about
this for years but nothing happens," said a manager at one
British oil and gas independent with concessions in Italy.
"It's not the 12-mile ban, it's the lack of clarity. Italy
has some of the biggest oil and gas reserves in Europe, but on a
reserves-to-production basis it's bottom of the class."