Italy to suspend oil and gas exploration activities

Oil and gas company ADX Energy has informed that the Italian Senate has passed a Bill to suspend oil and gas exploration activities in permits that have been approved or are in the process of being approved.

The suspension, if approved, would be for a period of up to 18 months to enable the government authorities to evaluate the suitability of exploration areas for sustainable hydrocarbon exploration and production activities (the Plan).

The bill is scheduled to be voted on in Parliament on the 12th of February 2019 and if enacted will become law, ADX said.

It is intended under the proposed legislation that the Ministries of Economic Development and Environment will review all areas in the Italian onshore and offshore territories to determine which are suitable for sustainable hydrocarbon prospecting, exploration and development activities (“E & P Activities”).

All areas will be assessed based on environment, social and economic suitability. Offshore areas will be considered on the basis of the potential effects on the ecosystem, as well as impacts on sea routes, fishing and potential interference with the coastal communities. Areas considered suitable for E & P Activities will resume activities. If The Plan is not enacted within two years activities will resume.

“Unfortunate setback”

ADX said: “ADX anticipates that the d 363C.R-.AX permit offshore Sicily containing the Nilde oil field given its distance from shore (53 kilometers) and its location in a benign sea environment in terms of sea bottom carbonate banks and associated life forms and will be judged appropriate for E & P operations. In order to minimize the risk ADX has requested a reduction in permit area by approximately 55% to minimize perceived impact.”

The reduced area will include the Nilde oil field, the Norma and Naila discoveries as well as the most prospective areas for future exploration.

“This is an unfortunate setback given the recent positive engagement with Italian Authorities following the provision by ADX to the Italian Authorities of farm in agreement documentation with a view to securing permit ratification (the “Decree”) as soon as practically possible,” ADX said.

On the positive side, ADX said, the Plan may result in a more efficient framework for achieving environmental approvals for operations in pre-approved areas. ADX said it would seek to secure a positive judgment on financial capability before any new law is enacted to provide greater certainty to its farmin partner SDP and other parties that have recently expressed interest in participating in the Nilde project.

“ADX will continue to keep shareholders informed in relation to the passage of the Bill through the Italian Parliament and its potential effect on the d 363C.R-.AX permit and the Nilde Redevelopment project,” ADX added.

As previously reported, ADX in October 2018 said it would farm out a 50 percent interest in the license to SDP Services Limited, who would fund a part of its work program in the 363 C.R-.AX Permit.

ADX then said SDP would fund the work program commitments of Audax Energy Srl (Audax) a wholly owned subsidiary of ADX up to a maximum of Euro 20.82 million to earn a pro-rata interest of 50% upon completion of funding. The farm-out is subject to the Italian Licensing Authorities ratifying the license.

Upon ratification of the License SDP will receive 5% net profits royalty interest attributable to any future production from the Nilde Field. ADX will remain operator of the license.