Italy

Italy, one of the world's largest industrial economies, 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 interest to energy related companies.

The partly privatized ex State oil and gas company ENI (formally 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 North Africa, the Eastern Block 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 Companies 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 in 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 to the north of Milan and close to existing oil and gas fields within one of the major hydrocarbon producing regions of Europe.

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 'light' crude of 42 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.

The Borsano permit came to the end of its first term during November 2009. The Company's Italian subsidiary Puma Petroleum S.r.L, however lodged an application for an extension period with the relevant Ministry and further discussions will take place shortly with a view to expanding a determination on this application.

Key has continued working on drilling preparation activities for the Borsano prospect and technical studies of the area. However the exploration license lies in a heavily urbanised portion of the Northern Po Valley and the proposed drilling location lies in a built-up industrial/residential area. The Po Valley Basin contains many producing fields, some along trend with the Borsano Permit.

Offshore Italy:

The company has interests in four application areas as follows;

Lampedusa	d341 C.R-PU
Lampedusa	d342 C.R-PU
West Sardinia	d90 E.R-PU
Elba	d91 E.R-PU

 

Environmental Impact Assessment (EIA) reports for each area have been evaluated by the Ministry of Environment and Key Petroleum has been advised by the Ministry of their approval.

Further technical evaluation work 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 are owned by Key's subsidiary Puma Petroleum S.r.L, and are being prepared for exploration drilling and possible farm-out.

Key holds a 100% interest in four exploration permit applications, 2 permits offshore from the island of Lampedusa and another 2 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 Petroleum with 2 permits, in relatively 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 km 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 km, both of which have demonstrated gas shows. The primary objective is for gas and possibly oil within the Mesozoic carbonates.