Italy’s government has given a key gas field held by Prospex Oil & Gas (LSE:PXOG) and United Oil & Gas (LSE:UOG) the initial approval for development. The Selva gas field is located onshore in Po Valley, a proven hydrocarbon region in Italy where over 5,000 wells have been drilled.
Selva’s owners are targeting daily production of 5.3MMscf/d from two reservoirs in the first stage of development. This involves installing a fully-automated gas plant at the existing Selva/Podere Maiar-1d appraisal/redevelopment well site. A 1km long pipeline will also be laid to connect the plant to the Italian National Grid. The field is due to come online in 2020.
Prospex owns a 17pc interest in Selva and rose 3.75pc to 0.25p on the news that it had received preliminary government approval. United Oil & Gas, which holds a 20pc stake, was down 2.6pc to 4.99p in morning trading.
Final approval is subject to the completion of customary regulatory processes. This includes the sanctioning of an environmental impact assessment.
Selva is operated by Po Valley Operations (PVO) and found on the Podere Gallina exploration permit. It historically produced 83Bcf of gas between 1960 and 1984.
A new appraisal/redevelopment well called Podere Maiar was drilled at the site towards the end of 2017. During testing, it enjoyed peak flow rates of 5.2MMscf/d from one reservoir called C1 and 4.6MMscf/d from another called C2. The strong results confirmed a significant gas discovery.
A further phase of development is planned once stage one has completed. However, this is contingent on the results of a 3D seismic acquisition programme scheduled throughout 2019. If it goes ahead, the work will see PVO drill additional wells to expand Selva’s natural gas resource base significantly. Drilling will target prospects called Selva East and Selva South Flank, among others.
Prospex non-exec chairman Bill Smith said today’s news takes Podere Gallina one step closer to becoming the firm’s second revenue-generating asset. The business also owns a 50pc interest in the producing Suceava licence in Romania.
‘As with Suceava, Podere Gallina offers significant development upside and, importantly, the approved development plan covers multiple prospects that have already been identified on the licence,’ he added. ‘These prospects will be targeted through the acquisition of 3D seismic data to further de-risk the additional prospectivity and inform a future well programme.’
Brian Larkin, chief executive and United Oil & Gas, echoed Smith, calling today’s news a ‘key regulatory milestone’ in advancing Selva towards production.
‘It is also a significant milestone for United as commercial gas production at Selva is expected to generate significant cash flow for the Company from 2020 onward,’ he said. ‘As well as progressing with the development, we are also excited by the upcoming 3D seismic acquisition in the Licence, which will focus on proving up the huge potential of the wider licence area. Subject to successful results from this acquisition programme, additional wells will be drilled, aiming to significantly increase the overall resource base within the Selva concession.’