Boston, MA -- (SBWIRE) -- 03/27/2014 -- Although Italy is thought to retain moderate untapped hydrocarbons potential, bureaucratic and regulatory challenges are set to hamper previously outlined goals to reduce the country's hefty import burden. Despite the start of production from the Tempa Rosa field from 2017, we see only limited upside risk to our production forecast from current exploration and production efforts. While we expect increased reliance on liquefied natural gas (LNG) imports as new infrastructure comes online, we are not yet assuming all planned terminals will go ahead, given delays to other plans. We also see risks that Italy's sizable downstream sector will see further downsizing as the sector struggles under the pressure of persistently low margins.

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The main trends and developments we highlight in Italy's oil and gas sector are:

- According to the EIA, Italy is estimated to have produced 156,530 barrels per day (b/d) in 2013. We see this remaining broadly stable until 2015. We forecast that Italy will see an increase in oil production from 2017 onwards, as the Tempa Rosa field comes online. Production is set to peak at around 210,000 b/d in 2020.
- Italy is seeking to reduce its spending on energy by cutting imports. On October 16 2012 it unveiled a new energy strategy that seeks to reduce imports to 67% of demand by 2020. However, the ability to meet these already ambitious targets is hampered by an absence of policy clarity with successive changes in government. Challenges also stem from a complicated bureaucracy and regulatory environment, with exploration and production efforts frequently delayed.
- Italy is thought to retain moderate untapped oil and gas potential. Activity both onshore and particularly offshore presents some upside risk to our outlook. The Mediterranean is increasingly gaining interest, due to the substantial hydrocarbons potential in the southern Mediterranean near to Cyprus and Israel, but Italy's waters remain prospective and underexplored. However, a cumbersome drilling process with regulatory hurdles has slowed investment. Onshore, a number of smaller prospects are under appraisal but have only a minimal impact on Italy's sizable import burden.
- Italy's oil consumption was 1.28mn b/d in 2013. By 2018 we forecast that oil consumption could fall even further to hit 1.21mn b/d and then slightly rise to 1.23mn b/d by 2023. Overall, we expect that by 2023 net imports will amount to 1.03mn b/d.

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