PO VALLEY ENERGY LIMITED - ASX: PVE

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Description

Po Valley Energy is a leading independent Oil and Gas enterprise growing rapidly from quiet, results-driven beginnings. The Company currently operates exclusively in northern Italy exploiting the large hydrocarbon system and in December 2009 it became a gas producer, bringing its first field into production - with more to come. All of the Po Valley Energy's fields are in very close proximity to the pipeline grid and major consumers in the north of Italy.

Sillaro

The field was originally explored by ENI between 1955 and 1982 with seven wells drilled in and around the structure. The field contains gas bearing zones in the Pliocene level at a depth of 2,100 metres. The deeper Miocene level, at a depth of 2,500 metres, was previously drilled by ENI and found to have a gas bearing reservoir.

In June 2009 the Company was granted approval to install surface plant to develop the Sillaro gas field. In July 2009, the Company drilled a second well -- Sillaro2dir -- into the Pliocene gas reservoirs, designed to produce from multiple levels and to increase overall flow rates and optimise total field recovery. Testing at Sillaro-2dir confirmed six productive gas bearing levels in the field with a combined flow rate from the 4 tested levels of 368 million cubic metres per day.

In May 2010, despite severe winter weather conditions, the field commenced production on Sillaro-2dir from levels A and E while the Sillaro-1dir well was connected in June 2010 to produce from levels C1+C2. Actual flow rates and pressures behavior are in line with the start-up plan and the plant is working efficiently.

In June - July 2010, a static and dynamic reservoir study was carried out by Dedicated Reservoir Engineering and Management (DREAM), a technical consultancy associated with the University of Turin to re-assess the recoverable reserves from the field. The resulting assessment indicated Sillaro Proven (1P) reserves of 230million cubic metres (8.1 bcf). Proven plus Probable (2P) reserves from the field have now a higher degree of certainty and are estimated to be 248 million cubic metres (8.8 bcf).

Sillaro is running smoothly, with stable plant and pressure performance, achieving total production for the 2010 year of 18.5 million cubic metres at an average of 83,000 cubic metres/day.

Castello

Castello, east of Milan, is the first Company's gas field in commercial production. The field was drilled in 2005 at a location updip from the former ENI Agnadello well, which produced 13 billion cubic feet of gas over a period of five years in the 1980s.

During 2009 the Company achieved the production concession, built the gas plant and, in December 2010, convened gas production. In April 2010 the Company advised the market that the Vitalba-1dir well was experiencing a faster than anticipated decline in wellhead pressure, and outlined plans to conduct down-hole pressure measurements to investigate the situation. During May and June 2010, three rounds of test work and interventions were completed. The first down-hole test work identified water incursions in the deepest level and this level was shut off using a cement plug, leaving the shallower level open. Subsequent test work completed late in June and interpreted early in July indicated that the poor performance of the shallow level was a result of poor reservoir characteristics and that new perforations would be unlikely to improve well performance.

The Company's plan for this field is to drill a side-track well from the existing surface site to target Agnadello-1 attic gas reserves defined by the recently completed static and dynamic reservoir study on the field. The optimum bottom-hole location is currently under review. Planned purchase of additional 2D seismic lines (15- 20 km) from ENI will fine tune the optimum location.

This new well, named Vitalba-1dirA, will be deviated from the current Castello plant location and connected to the existing Castello plant to allow recommenced production.

The estimated cost of the deviated well is around €2.5 million. Steps to achieve final authorization for the drilling of Vitalba-1dirA sidetrack are underway. The Company expects final authorization by the second quarter 2011. Meanwhile production continues at Vitalba-1dir at approximately 3,500 cubic metres per day.

Based on the new static and dynamic reservoir study, probable reserves from the field are estimated at 103.9 million cubic metres (3.7 bcf).

S. Alberto

Sant'alberto is located in the north of Bologna and Edison, the previous partner and operator, submitted the production concession application in July 2006. In March 2008, Po Valley reached an agreement with Edison to assume 100% ownership of the licence. In February 2009 the Ministry confirmed that the Company is now the sole operator/owner effective from the 29th October 2008.

The Ministry accepted the Company's work program for the San Vincenzo licence and a new 2D seismic acquisition program of approximately 30 kilometres is planned by February 2011. The structural interpretation deriving from the new seismic, together with a recently completed reservoir study considering the past production history matching, will allow us to define a suitable subsurface target area for a production well. Our renewed focus on the field aims to achieve commercialization in the shortest timeframe.

Bezzecca

The Bezzecca-1 well is located within the Company's 100% owned Cascina San Pietro permit area, east of Milan. Formerly called Pandino, the field was drilled in the 1950s by ENI and produced 5 bcf.

Bezzecca-1 well was drilled in March-May 2009 to a depth of 2,010 metres and it was tested across three gas bearing levels -- in the upper Miocene and in the lower Pliocene. Initial flow rate from the deep Miocene level from 1925m to 1945m was 2 million cubic feet per day on one inch choke at a pressure of 1760psi. The tested flow stabilized and exhibited rapid and full pressure recovery.

Bezzecca field data was evaluated in an integrated reservoir study comprising seismic re-mapping, petrophysical evaluation and reservoir simulation. Our phased development plan calls for the connection of Bezzecca-1 well to the Castello production plant by way of an 8km gathering line and the subsequent drilling of a second well (Bezzecca-2) to drain the structurally highest portion of the field. The necessary application for the production licence was lodged with the Ministry of Energy at the end of January 2011.

Fantuzza

Fantuzza, located in the Crocetta exploration licence, is a deeper structure of Sillaro. The well is located near the former ENI Budrio-6 well and is targeted at exploiting potential deeper Miocene reserves. Surface plant and pipeline connections at Sillaro have been sized to take advantage of a success at Fantuzza-1 well, located about 2 kilometres East of Sillaro production site.

A static and dynamic reservoir study was carried out by DREAM in June-July 2010 to re-assess the recoverable reserves from the field. A static model was first generated from the seismic maps defining the reservoir structure from well logs and from a general geological understanding of the area. Based on this work, a dynamic model was then established and calibrated with the interpretation of production tests from the existing wells and the short production history of the field.

The calibrated dynamic model was then used to forecast the field production and to estimate the recovery factor, resulting in estimates for Proven (1C) contingent recoverable resources of 53 million cubic metres (1.9 bcf) from 1 well double completed, and Proven plus Probable (2C) contingent recoverable resources of 163 million cubic metres (5.8 bcf) from two wells single completed.

The Fantuzza-1 drilling program has received environmental clearance and final drilling approval from UNMIG is expected shortly. Expected daily production from 2 wells was estimated to be in the order of 120,000 cubic metres per day (4.2 mmscf/d) for a period of more than three years. The Company is considering a farm-out campaign to fund this well.

Mine For

oil, gas

Location of operation(s)

Italy

Address

Level 28 , 140 St Georges Terrace
PERTH, WA, AUSTRALIA

Phone

(08) 9278 2533

Email

Website

http://www.povalley.com

Last Updated

2/3/2011