Tag Archives: berlusconi

Italian Offshore Back on Track but Progress Has Been Limited

ImageAlmost a year after Rome reversed a ban on offshore drilling, Italy’s energy sector is showing signs of life with new efforts and interest on the part of foreign firms.

This month has seen progress reported by   Petroceltic, Northern Petroleum and Mediterranean Oil and Gas regarding offshore efforts in Italian waters. However, despite such advancements, progress has been limited in improving the country’s overall energy standing – a situation made worse by a toxic political and economic environment and local opposition.

The Mario Monti government announced an end to a ban on drilling within five nautical miles of Italian shores that had been put into place following the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

The purpose of the government’s reversal on offshore drilling last year was two-fold. First, an increase in domestic production would help ease the country’s current, heavy dependence on foreign producers. Italy brings in about 90 percent of its oil and gas needs from outside the country and has seen alternative energy options evaporate over the last three years, making those imports all the more important. While renewable development has suffered amid a wave of government cuts and a loss of investor confidence brought on by the country’s economic crisis, Italy’s push to reintroduce nuclear power disappeared almost as soon as news of Japan’s Fukushima disaster reached Rome.

Second, the financial benefits of a boost in domestic production could help jumpstart Italy’s ailing economy, offering little in the way of investment options to outside investors. When the Monti government announced the plan to ditch the offshore ban, the country’s Economic Development Minister Corrado Passera predicted that expected increases in output allowed by the revision could bring in as much as 15 billion euros, while reducing the country’s energy bill by about 6 billion euros, according to Bloomberg.

Nearly a year on from the ban reversal, Italy’s energy options have offered little relief due to a precarious economic and political environment as well as instability in Algeria and Libya, two of the country’s largest providers of oil and gas.

Complicating the offshore situation still further has been the actions of local environmental and political advocacy groups. Even before the 2010 ban had been into place, groups in Sicily and along the Adriatic coast had pushed for drilling bans in the name of environmental and tourism protection. Although the ban has been reversed on a national level, local groups have still challenged exploration efforts in individual cases leading to production delays.

Offshore may have returned to Italy, but it is still far from clear whether it can provide the diversification and revenues

Image: Rigzone.com

Originally Posted: Newsbase Euroil Monitor

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Italy’s Elections Offering Few Energy Specifics Beyond More Local Control

Europe-scrambles-to-save-euro-markets-surge-N1L45LK-x-largeAs Italy prepares to go to the polls after months of frustration about tighter government spending policies and slow recovery, the country’s energy sector faces a wave of uncertainty as candidates hint at solutions, but offer few specifics.

The late February elections present a stand off between supporters of an increasingly unpopular technocratic government led by Mario Monti and critics of his tighter belt approach, led by a newly resurgent Silvio Berlusconi, or as the Christian Science Monitor described it, “the populism of short-term fixes and the long-term reforms necessary to make Italy’s economy solvent, competitive, and sustainable over the long run.

So far, leaders of all sides have hinted at what the country could see as far as expanding an energy sector that is largely dependence on foreign resources for oil and natural gas. After a reversal of an offshore drilling ban late last year, Monti unveiled plans to more than double domestic crude production, suggesting increased development of local resources in favor of expensive and uncertain imports. Similarly, the head of the center-left alliance, Pier Luigi Bersani said he would emphasize domestic reserves with a concentration on natural gas and a further reduction of state support for renewable options, according to Dow Jones. For his part, Berlusconi has offered few specifics, but does bring with him deep ties to Russian producers and affection for a nuclear return in the country.

More than a specific threat to Italy’s energy sector, the country’s national elections are proving to be a source of concern to the economy and investors in general. Despite recent declines in borrowing costs, after a series of painfully high auctions, Italy has seen investors grow skittish about the future or at least about the instability that could accompany a political transition. At the heart of this are critics of the current administration’s strict spending cuts and tax reforms, introduced in an attempt to reduce stress on the economy, with many taking aim at the appointed leadership of Mario Monti. While a full return to power by Berlusconi is not expected, the former prime minister’s ability to block a full parliamentary majority could shatter confidence about Rome’s ability to stay the course and scare off nervous investors. However, even if a Democratic majority is achieved, some have suggested that their policies may prove to be just as destabilizing.

“I’m investing in the euro zone but not in Italy, because although they have a primary surplus, there’s huge uncertainty politically,” Torgeir Hoien, head of fixed income at $19 billion Norwegian investment firm Skagen told Reuters.” What kind of policies will the Democratic Party pursue if they win?”

Originally Posted in Newsbase’s Euroil Monitor

 

 

 

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