Operations
CYGAM OPERATIONS:
ITALIAN PERMITS:
ITALY
Management considers the existing exploratory permits in Italy to have great potential for the future growth of the Company. Italy has been somewhat neglected by oil and gas companies in the past, partly because of the former monopoly the Italian state company, ENI, had on exploration permits. However, new European Community regulations introduced in the early 1990s under the mandate of the European Energy Commission, forced ENI to relinquish prized exploration acreage.
As a result of increased exploration activity in the last decade, in early 2006 Italy became the third largest producer of crude oil and natural gas in Europe, after the United Kingdom and Norway. According to government records, Italian production currently stands at 330,000 barrels of oil equivalent per day (boepd) and is comprised of 135,770 barrels of oil per day (bopd) and 1,165 million cubic feet per day (MMcfpd). The giant Monte Alpi oil field, discovered in 1987 onshore southern Italy, is now contributing approximately 90,000 bopd, with further development activity planned for the future.
It is also worth noting that only 5,795 wells, including 1,187 offshore wells, were drilled in Italy from 1941 to 2004, compared to the 298,617 wells drilled in Alberta from 1955 to 2005. In Alberta, over 20,000 wells were drilled in 2005 alone, while in Italy only 30 wells were drilled in 2004. From an exploration point of view, there is still a vast exploratory and drilling potential in Italy.
The stated goal of the Italian government is to reduce imports and to provide an environment conducive to exploration for both domestic and foreign companies. Unfortunately, in Italy, access to well and seismic data is not as easy to obtain as in Canada, and operators resort to exchanging or buying information from other operators. This situation will often cause delays in implementing exploration plans. Obtaining final ministerial approval on new permits can also be a lengthy procedure, especially for onshore permits where both provincial and federal jurisdictions are involved. On the other hand, Italy’s royalty structure is one of the best in the world. For onshore permits, the state royalty on production of both oil and gas is a maximum of 7%, with a provision that no royalties are paid on gross corporate yearly production less than 125,000 barrels of oil and 700 MMcf of gas. For offshore permits, the state royalty on oil production is a mere 4%, with a provision that no royalties are paid n gros corporate production less than 300,000 barrels of oil per year. Offshore gas production is subject to a 7% royalty, but the first 1,750 MMcf per year are royalty free. The combined corporate, federal and provincial tax is a maximum of 32% and there are no restrictions on repatriation of profits.
The Company currently holds 354,584 gross acres onshore and offshore Italy (243,684 net acres).