Selva gas estimates on the rise
Po Valley targets first production in 2020 from its recently awarded Italian concession
Po Valley Energy has increased reserve estimates for the Selva gas field, near Bologna in northern Italy, following a fresh evaluation of the field's resources. The field was a significant historical producer for Eni, producing 84bn ft³ from 24 wells between 1956 and 1984. Now, Italy is keen to revive domestic production—from brownfield sites at least—to try to reduce its import dependency.
A production license for the Selva Malvezii concession was awarded on a preliminary basis to Australia-listed, Italy-focused Po Valley in January 2019. An initial estimate of proved plus probable reserves by consultancy CGG remains unchanged at 13.3bn ft³. But there has been a 74pc increase in the best estimate of prospective resources to 91.5bn ft³. Contingent 2C resources, previously zero, now stand at 14.1bn ft³.
In April, Po Valley filed an environmental impact study to the environment ministry, ahead of a finalised award of the concession. It wants to start production in 2020, with a projected output of 150,000m³/d (5.3mn ft³/d), which will be supplied to the national gas distribution network via a pipeline less than 1km (0.6 miles) long, according to the firm.
"Technical work is continuing, with the aim of finding additional interesting features, given the significant gas potential of this acreage," says the firm. Po Valley is an operator, with a 63pc stake, along with relative minnows United Oil and Gas (20pc) and Prospex Oil and Gas (17pc).
"[The announcement] confirms that abundant reserves still exist in the Po Valley and all over Italy, [even though it] imports around 65bn m³/yr of gas, mostly from Russia and North Africa," Davide Tabarelli, chief executive of Nomisma Energia, a Bologna-based consultancy, tells Petroleum Economist.
"The determination of Po Valley is laudable since, in the last decade, it has become more and more difficult to carry out production activities, both for large projects such as those in the Adriatic Sea and Basilicata [in southern Italy] and small ones such as this," he adds.
Local opposition to oil and gas activities in Italy has been on the rise recently, contributing to a moratorium on new exploration activities, introduced by the government in February and expected to last at least 18 months. However, this does not apply to production concessions such as Selva.
Another oil sector analyst at an Italian investment bank described Po Valley's development as "one of the most important of recent years" in the gas upstream sector, adding that it holds "significant value, given the Italian gas market is a premium one".
One of the biggest strengths of the project is its close proximity to the Italian gas grid, removing the need for heavy investment in pipeline construction. The high quality of gas found in the Po Valley area will also reduce costs related to blending.
Source: Petroleum Economist
Overall, these benefits could result in cost reductions of 5-10pc for gas from projects such as Selva, the analyst says. However, further upstream gas projects in the area may struggle, given opposition at the political level that could result in new approvals being blocked.
Italian domestic gas production stood at around 5.5bn m³/yr in 2017, down from 5.8bn m³/yr the previous year. Eni was the leading producer, with output of 4.2bn m³/yr in 2017.
Separately, Po Valley also released oil and gas condensate resource estimates for its onshore oil exploration holdings in northern Italy. These included a combined 334pc increase in 2C resources at its Bagnolo in Piano and Ravizza oil fields in the Cadelbosco Grattasasso exploration licences, which now stand at 27.3mn bl and 16.1mn bl, respectively.
The company says further exploration appraisal and evaluation will be required to determine if "a significant quantity of potentially moveable hydrocarbons" exist.