Italy

Italy is one of the world’s largest industrial economies but produces less than 20% of its energy needs. The country’s heavy reliance on imports of oil and gas has therefore made energy security and diversification of sources of energy of particular interest to oil and gas companies. The partly privatised ex State oil and gas company, ENI (formerly AGIP) has been in operation for many years and there is a network of oil and gas pipelines across the country. Gas is being piped in from the North of Africa and will also be piped across from Greece to feed the energy hungry country. With this in mind, Key Petroleum is establishing its position in the country and has interests in 5 areas, both onshore and offshore.

Onshore Italy, Po Valley:

Borsano (Key 100%)

The Company continues to evaluate this onshore area. A drilling proposal has been prepared and reviewed by the Company’s Italian operations team.

Key Petroleum is also working with its Italian consultants and the relevant governmental departments to develop a drilling location and to put in place the necessary approvals required complying with local requirements.

Key believes the 317.86 sq km (approximately) Borsano Permit onshore in Italy’s Po Valley has considerable potential for gas production and for deeper oil plays. The Borsano Permit is located just north of Milan and close to existing oil and gas fields within one of the major hydrocarbon producing regions of Europe.

In 2003 the Po Valley was producing approximately 70,000 bopd. Only 8 km to the southwest of the Borsano Permit is the Villafortuna Oil Field where initial flow rates from wells have been reported at 8,000 bopd. Oil produced in this region is classed as a ‘light’ crude of 42 degrees API gravity. This makes it relatively easy to process, transport and handle. The Brugherio Gas Field is located only 5 km to south east of the Borsano Permit and a large gas storage project has been developed there.

Offshore Italy:

Application Areas (Key 100%)

The Company has interests in four application areas as follows:

Lampedusa	d 341 C.R–.PU
Lampedusa	d 342 C.R–.PU
West Sardinia	d 90 E.R-.PU
Elba	d 91 E.R–.PU

 

Environmental Impact Assessment (EIA) reports for each area are currently being evaluated by the Ministry of the Environment and Key Petroleum is awaiting the Ministry’s final response and approval.

Technical evaluation work has continued in parallel with the EIA lodgement process with the Company working closely with its Italian technical specialists in evaluating geological and geophysical data.

The focus for Key’s technical team now is the preparation of detailed geophysical mapping to assist in developing leads and prospects.

The Italian offshore projects owned by Key’s, Puma Petroleum S.r.L, are being prepared for exploration drilling and possible farmout. Key holds a 100% interest in the 4 exploration permit applications, being 2 permits offshore from the island of Lampedusa and 2 others referred to as West Sardinia and Elba South. These Italian offshore areas are located in geologically prospective areas. Lampedusa is the furthest southern Italian land point in the Mediterranean Sea, providing Key with 2 permits, in shallow water depths and covering an area of approximately 1,375.45 sq km. These areas are adjacent to Tunisian territory, where there are a number of producing oil fields.

The West Sardinia application permit comprises approximately 683 sq. kms and covers the prospective offshore extension to the Campidano Graben. The primary play in the area is envisaged to be gas within Pliocene and Miocene sandstones trapped in titled fault blocks. Elba South has 2 wells within the permit application area of 643 sq. kms, both of which have demonstrated gas shows. The primary objective is for gas and possibly oil within the Mesozoic carbonates.