CAPITAL: ROME
MONETARY UNIT: LIRA
REFINING CAPACITY: 2,359,100 B/CD
OIL PRODUCTION: 91,800 B/D
OIL RESERVES: 621 MILLION BBL
GAS RESERVES: 8 TCF

Italy approved a bill in May 2000 fixing antitrust ceilings and implementing other measures to open the heavily monopolized domestic natural gas market in compliance with European Union directives.

Beginning in January 2002, no company or group would be allowed to supply more than 75% of domestic gas demand. This ceiling would be further reduced 2%/year to 61% in 2010. And no single operator would be allowed to dominate more than half of the end-consumer market.

The government owned 35% of gas company ENI SPA and planned to sell 5% in 2001 and at least 10% of the electricity firm Enel. The sale of ENI stock was expected to raise $2.5 billion.

In response to deregulation, ENI planned to restructure its Snam gas subsidiary and its storage business. The company's gas pipeline network represented 99% of the Italian network.

Gas transmission would be transferred to a new company in 2001 to comply with EU and Italian decrees. Shares of the new company would be listed, and ENI could sell the majority share.

ENI's 29,000-km system carried 67.1 billion cu m of gas in 1999. ENI valued the network at 10 billion euros.

ENI would also transfer its gas storage system, one of the largest in Europe, to a new company.

As a way of using its gas surplus, ENI was investing in the newly deregulated power generation business. ENI wanted to buy a 30% share of the newly constituted Elettrogen consortium from Enel.

If the government wouldn't allow the purchase, ENI could refurbish the old power plants it had in petrochemical sites and build new ones. ENI wanted generation capacity of 5,000-7,000 Mw in Italy.

It agreed to cooperate with Libya to build a gas pipeline from Zuára, near Tripoli in Libya, to Gela in southern Sicily. ENI would import 8 billion cu m/year, beginning in 2004. Half of that was committed to Italian Edison. A further 2 billion cu m/year would go to Gaz de France.

The European Court of Justice ruled that Italy violated European Union law by retaining veto and other powers over companies it once owned.

Under its golden-share policy, the Italian Treasury had reserved the right to veto strategic board decisions, appoint board members, and approve investors wishing to buy more than a 5% in former state-owned companies such as ENI.

The European Commission, the executive agency for the European Union, sued Italy, claiming the golden-share rules breached EU free-market practice. Italy subsequently revised its laws, eliminating most of the Treasury's powers over former state-owned companies.

Exploration

Italy's southern Apennines was on the threshold of large oil developments.

The area had indicated reserves of 1.02 billion bbl, and seismic data indicated that the major onshore producing sections in the Val d'Agri and Tempa Rossa fields also were present offshore. The Italian government opened those offshore areas for competitive tender.

The Val d'Agri project had three fields. Monte Alpi was discovered 1988, Monte Enoc in 1994, and Cerro Falcone in 1992. Together, they held 600 million boe. Associated gas was 7% of the total.

ENI operated the fields in a joint venture with Enterprise Oil PLC.

Development of the three fields would require 42 production wells. Also part of the development was the renewal of the existing Monte Alpi oil center at Viggiano, opened in 1996 and producing 9,000 b/d in 2000.

A 150-km pipeline was being laid to the 84,000-b/d Taranto refinery and marine terminal to prepare for increased production in late 2001.

Val d'Agri production was expected to reach 104,000 b/d by 2002, doubling Italy's production of crude.