As indicated in the announcement of 12 February, Cabot Energy (AIM: CAB), the AIM quoted oil and gas company focussed on creating predictable production growth in Canada, confirms that late on 12 February 2019, the Italian government signed a decree which enacts the suspension of work on oil and gas exploration permits or applications for new exploration permits in Italy whilst a review is undertaken. The period given for the review is up to 18 months. The suspension will be lifted as soon as consensus is reached on the terms under which the different areas will proceed with oil and gas exploration. In the event that no consensus is reached within 24 months, the suspension will be lifted.
During the suspension period, the Ministries of Economic Development and Environment will review all areas in the Italian onshore and offshore territories as part of the Plan for Sustainable Energy Transition of Suitable Areas (“PTESAI”) Bill, to determine which are suitable for sustainable hydrocarbon prospecting, exploration and development activities.
Following the assessment of areas, a decision will be taken whether to allow further exploration activity or to reduce or withdraw licences in that area. Should agreement not be reached between The Government and The Regions on all on-shore licences within 24 months, the suspension will be lifted and rulings will only be issued for offshore areas.
Cabot Energy confirms that its exploration licences went through a rigorous environmental review and is hopeful for a positive outcome. However, the moratorium provides the opportunity for the Company to evaluate its future strategy in both its onshore Po Valley Cascina Alberto exploration permit with its partner, Shell Italia, and in its 100 per cent owned and operated offshore permits in the Southern Adriatic and Sicily Channel. Cabot Energy has five permits and seven applications in process in total in Italy.
The legislation makes allowance for compensation for companies that are impacted. Should it become necessary, Cabot Energy could seek compensation for all exploration costs up to the withdrawal date.
Scott Aitken, Chief Executive Officer, commented: “This new legislation is not a ban on exploration. It allows the Italian government to reappraise the exploration licences it has granted. Cabot Energy will ensure the Company is prepared to rapidly progress our licences as soon as the review is completed, whenever that occurs within the next 18 months.
“Cabot Energy’s focus remains the funding of a scalable and repeatable development drilling programme in Canada. As announced in November 2018, our Canadian assets have shown great promise with an annual increase of 26% in gross Net Proven plus Probable reserves to 3.6 mmboe as well as a 339% increase in gross reserves and resources of the Canadian asset to 42.2 mmboe. We will continue to work with the authorities in Italy and remain hopeful of either securing a positive outcome for our exploration licences or receiving appropriate compensation at the end of the two-year assessment period.”