Rome, Jan 5, 2009 AEST (ABN Newswire) - The first gas offtake sales agreement - totalling approximately EUR38 million (A$77.5 million) - has been secured by Australia's Po Valley Energy Limited (ASX:PVE) for emerging production from the Company's northern Italy gas fields.
The contract milestone will generate the first gas sales revenue for Po Valley as two of its Italian gas fields, Sillaro and Castello, are brought into production progressively from mid 2009.
The three year gas sales agreement announced today covers part of planned production from the Sillaro and Castello gas fields which are two of Po Valley's rapidly expanding portfolio of gas exploration and development assets in northern Italy.
Po Valley said further agreements to cover the balance of production for the first three years from the Sillaro and Castello fields are expected to be executed early in 2009.
Bidding "intense" - CEO
"The offtake agreement underscores the enormous development and production upside in these and our other northern Italian petroleum assets," Po Valley's Chief Executive Officer, Mr. Michael Masterman, said today.
"The bidding for the output from these two fields was intense - with 11 bidders in the negotiation ring," Mr Masterman said.
"Significantly, the sales agreement comes at a time of great uncertainty in the Western European gas supply situation created by the recent shut-off of Russian gas supply to the Ukraine," he said.
"It is strongly in the interests of Italian customers to have gas supply from inside Italy. This in turn augurs well for the potential to more rapidly develop our other northern Italy energy assets, as development and connection costs are low, but tap into a high demand and competitive market."
The maiden offtake agreement is with Italtrading SpA, an established gas, energy and renewables trading and wholesale company. Italtrading is part of the AFIN Group, itself a private company founded in 1956 with a global turnover at 31 December 2007 of around EUR500 million.
The terms of the agreement cover Po Valley's initial commissioning period for Castello, near Milan, and Sillaro, near Bologna, and then three years of full supply until September 2012.
Mr Masterman said the offtake terms were based around the ENI Gas Release price formula which incorporate a high base and variation with energy prices - the current price as at December 2008 equating to around US$14 per one thousand cubic feet of gas.
Po Valley's floor price under the offtake agreement is also protected by links to agreed price variations in a set percentage of a price basket for gas oil, fuel oil and crude oil.
The agreement is the latest milestone for Po Valley, which recently has:
- Completed its first gas pipeline connection to Italy's national gas grid
- Completed construction of a substantial amount of surface production plant to be installed on the fields in 2009, and
- Been awarded 20-year production concessions for its first two producing gas fields by the Italian Government.
Castello has proven and probable (2P) gas reserves of 6.3 billion cubic feet (bcf) and is expected to have an initial production rate of 2.7 million cubic feet a day starting in June/July 2009.
The Sillaro field has proven and probable (2P) gas reserves of 14 bcf, and is expected to have an initial production rate of 3.8 million cubic feet per day starting in September/October 2009.
Contact
Michael Masterman
Po Valley Energy
TEL: +61-417-851-303
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