ITALY - OVERVIEW
During November 2010, Orca Exploration Group Inc. signed an agreement with Northern Petroleum (UK) Ltd. to acquire between 70% and 75% of the Longastrino Block in the Po Basin onshore Italy. This acquisition sees Orca’s second entry into Italy during 2010. In May Orca acquired a 15% interest in the Petroceltic operated B.R268.RG Permit in the offshore Central Adriatic.
Under the terms of the farm-in with Northern Petroleum, Orca will pay 100% of the costs of the Tosca-1 well up to Euro 4.3 million and 70% thereafter for the drilling phase of the well. If the well is tested and completed, then Orca will earn an additional 5% by paying 100% of the testing costs up to Euro 1.3 million and 75% thereafter. The Company will also pay back costs of Euro 0.6 million.
Earlier in 2010, Orca committed approximately US$13 million to earn a 15% interest in the Petroceltic operated Elsa discovery block and 11 adjacent licenses. The Elsa field has a large volume of known oil in place, and an appraisal well was planned for Q4 2010 to determine the quality of the crude.
However, recent worldwide concerns about offshore drilling caused by the blowout of the Macondo well in the U.S. Gulf has led the Italian government to pass a law that excludes drilling in the Italian seas within 5 nautical miles of the coastline and 12 nautical miles in the region of protected marine parks. In view of this Petroceltic has suspended drilling of the Elsa-2 well and further activity on the permit until such time as the Ministry of Environment issues a decree of environmental compatibility for the drilling program and the partners apply for the permit to be reinstated. Orca is not liable to any costs associated with the drilling of Elsa-2 until a rig contract is signed.
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