BMI View: Italy's oil and gas sector will continue to suffer from a gradual depletion of its hydrocarbon reserves and the rapid downsizing of the country's ailing refining sector. While an active exploration scene and a gradually improving regulatory environment are positive signs, we believe these improvements will take some years to garner more substantial industry changes. This is particularly the case in the context of low oil and gas prices over the coming years.
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||122.0||121.8||120.0||117.2||124.5||151.5||157.8|
|Dry natural gas production, bcm||7.5||7.3||7.1||6.9||6.7||6.5||6.3|
|Dry natural gas consumption, bcm||61.9||63.1||65.0||65.7||67.4||68.7||69.8|
|Refined products production, 000b/d||1,355.4||1,423.2||1,309.3||1,256.9||1,256.9||1,258.2||1,256.9|
|Refined products consumption & ethanol, 000b/d||1,285.5||1,268.0||1,264.3||1,275.6||1,288.7||1,304.3||1,322.6|
Italy's oil production is expected to receive a significant boost from the Tempa Rossa field, which is set to come online in late 2018. Nonetheless, this will not suffice to achieve the government's goal of doubling oil production by 2020. Rapidly declining reserves are expected to push oil output gradually lower in the post-2020 period.
A deteriorating downstream sector in Italy, as elsewhere in Europe, has seen large refining capacity and refined products production cuts over the past decade. Further cuts are to be expected, given continued capacity oversupply and weak demand growth.
Economic difficulties are expected to continue suppressing oil consumption in Italy, which we see gradually declining till 2016, before stagnating or very slowly increasing until the end of our forecast period. Distillates consumption as a proportion of total refined products consumption will continue to make headway, as the share of gasoline consumption falls, due to the continued dieselisation of the vehicle fleet.
With limited domestic crude oil production, Italy will remain a large net importer of crude oil. However, net import requirements have fallen substantially and will continue to fall due to large cuts in refining capacity. On the other hand, the refining capacity cuts will see continued decline in net refined products exports, which should fall to near zero by the end of our forecast period.
Due to maturing fields and lack of new significant discoveries, Italy's gas production will continue on a downward slope throughout our forecast period, declining from an estimated 7.3bcm in 2015 to 5.4bcm in 2025. Small-scale developments will slow production decline to a yearly 3% decline rate over the forecast period.
A weak but positive economic growth trajectory, in addition to increased use in the residential sectors should see gas consumption growth remain in positive territory over the remainder of the forecast period. Nevertheless, a subdued economic environment and the strong rise of renewable for power generation will prevent more substantial consumption growth over our forecast period.
We expect Italy to remain one of the largest importers of natural gas in Europe with import volumes rising from an estimated 55.8bcm in 2015 to 67.7bcm in 2025.
The reintroduction by the 2016 Budget Law of the ban on exploration and production activity within 12 nautical miles of the Italian coast will stem some of the interest for offshore exploration. The lack of policy consistency also creates an uncertain regulatory environment for the industry. For example, as a result of the re-introduction of the ban, Rockhopper Exploration was told by the Ministry of Economic Development that Production Concession covering the Ombrina Mare Field Area in the central Adriatic Sea will now not be awarded. This is despite the company having complete dall the required technical and environmental authorisations.
Sound Oil reported in February 2016 it achieved first gas production at the onshore Nervesa gas discovery in northeast Italy.
In May 2015, the Italian government gave a final authorisation for the Trans-Adriatic Pipeline construction, despite local opposition in Italy's Apulia region, which is highly dependent on tourism.
In March 2015, Royal Dutch Shell's wholly owned subsidiary Shell Italia E&P farmed-in an 80% interest and operatorship of the Cascina Alberto permit onshore north west Italy from AIM-listed Northern Petroleum. Shell will pay USD850,000 in cash on completion of the transaction. Shell will continue with the North Petroleum exploration programme, which includes the acquisition of any new seismic data until the seismic costs reach USD4mn and exploration of the well until costs reach USD50mn.
In August 2015, Italy's Foreign Minister Paolo Gentiloni stated that Iran is likely to modify contract terms with the state-owned oil company Eni as the country emerges from a tough regime of Western sanctions. Earlier in August, Eni noted that it would consider investing in Iran after sanctions are removed and if Tehran provides favourable contract terms similar to international standards.
The Italy Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Italy including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.
BMI's Italy Oil & Gas Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and competitive intelligence on the Italian oil and gas industry.
- Benchmark BMI's independent oil and gas industry forecasts for Italy to test consensus views - a key input for successful budgeting and strategic business planning in the Italian oil and gas market.
- Target business opportunities and risks in the Italian oil and gas sector through reviews of latest industry trends, regulatory changes and major deals, projects and investments in Italy.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity) and Competitive Landscape Tables.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, covering oil and gas reserves, supply, demand and refining, plus analysis of landmark company developments and key changes in the regulatory environment.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the upstream and downstream sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecast:
- Pricing: Oil price (USD/bbl, WTI, Brent, OPEC basket, Urals); oil products prices (unleaded gasoline, gasoil/diesel, jet/kerosene – USD/bbl) at global hubs.
- Production, Consumption, Capacity & Reserves: Proven oil reserves (bn barrels), production, consumption, refinery capacity and throughputs (‘000b/d); proven gas reserves (tcm), production and consumption (bcm) and fuels trade.
- Imports & Exports: Crude oil exports/imports (‘000s b/d) and value of crude oil trade in USD. Fuels exports/imports (‘000s b/d) and value of fuels trade in USD. Natural gas imports/exports (bcm), by pipeline and/or LNG, and value of natural gas trade.
BMI’s Oil & Gas Risk Reward Index
BMI’s Risk Reward Indices provide investors (independents, NOCs, IOCs, oil services companies) looking for opportunities in the region with a clear country-comparative assessment of the upstream and downstream market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
A profile of the upstream and downstream sectors, including analysis of reserves, output, consumption and trade of energy products; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Comparative company analyses by USD sales, % share of total sales, number of employees, year established, ownership structure, oil production (‘000b/d), gas production (bcm), downstream capacity (‘000b/d) and % market share.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
Regional perspective on size and value of the industry. Plus comparative rankings by production, refining, imports and exports of oil, gas and LNG.
Global Oil Market & Oil Products Outlook
Based on our country coverage of over 99% of global oil and gas production and consumption, BMI provides demand, supply and price forecasts to end-2024 for oil, gas and oil products.
The Oil & gas Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.