Bank Clerk and Beachgoers May Save Italy's Oil Industry

 

Referring to a referendum on Sunday that will decide whether oil companies can continue to drill within 12 miles (20 km) of Italy's coastline, Doria said: "I'm not going to vote because I just don't know the issues well enough."

 

For the referendum to succeed, more than 50 percent of Italians must cast a ballot. Prime Minister Matteo Renzi says a "yes" vote against drilling would hurt jobs at a time when the economy is struggling to grow and has called on people to shun the ballot.

 

An opinion poll last month suggests three-quarters of Italians have scant knowledge of the referendum, which concerns a little-known industry mostly located off the east coast of Italy far from the major population centres.

 

The ballot was proposed by a number of regional assemblies which object to drilling platforms because of worries about seismic stability and the environment, as well as the impact on their tourist industries.

 

Italy imports around 90 percent of its energy needs and has been trying for years to get around grassroots opposition to boost domestic energy production and so reduce dependence on foreign suppliers such as Russia's Gazprom.

 

But if the referendum succeeds, fields run by the likes of Eni and Edison within 12 miles of the coast will be shut down when their concessions expire.

 

Should it fail, energy companies will be able to ask for further extensions until wells are depleted. Opponents of the vote say closing a subsea well with oil and gas still in it is a risky and costly business because of high pressure conditions.

 

"What worries me are the 11,000 jobs at risk," Renzi said earlier this month when inviting Italians not to vote.

 

Renzi has asked Italians to abstain, claiming the vote is pointless since the law has already been substantially changed. Asking people to vote no might also risk upsetting people inside his party where the issue is a sensitive one.

 

There are 69 exploration concessions in Italian waters, most of them gas, according to the industry ministry. Of these 44 could be affected by the referendum with 12 expiring in 2016.

 

Earlier this year Shell gave up on a 2-billion-euro project in the Gulf of Taranto after the 12-mile limitation, previously lifted, was reintroduced by the government for all new projects in an failed effort to head off the referendum.

 

Dublin-based oil explorer Proceltic International recently gave up on an exploration permit it was chasing while British-based Rockhopper Exploration is considering suing Italy for damages after it was told a concession it has permits for would not be granted.

 

"Italy has the tightest regulations in Europe that don't exist elsewhere and they're frightening off investors," says Davide Tabarelli, head of energy think tank Nomisma Energia.

 

"With so much uncertainty, who will have the courage to invest even outside the 12 mile line?" he adds.

 

Environmental watchdog Legambiente and other green groups say domestic oil and gas production is minimal and that continued focus on fossil fuels takes Italy further away from its renewable energy and carbon targets.

 

Gas production from offshore fields inside the 12-mile area currently accounts for around 3 percent of Italian consumption while oil output in the area just 1 percent.

 

According to Mediobanca Securities, the short-term impact of a "Yes" vote would be minimal since only 5,000 barrels per day comes from concessions inside the 12-mile limit.

 

But it will certainly have long-term implications as by 2027, 40,000 barrels of oil equivalent per day could be shut-in, which accounts for over 20 percent of Italy's oil and gas production, says analyst Alessandro Pozzi.

 

The referendum comes at an awkward time for the prime minister. An influence-peddling case centred on the country's main landlocked oil producing area, where Total and Shell operate, triggered the resignation of the industry minister two weeks ago.

 

Political opponents are seeking to use the scandal to bring voters out on Sunday to test the government's mettle as it gears up for a referendum on constitutional reform in October on which Renzi has staked the future of his government.

 

Former Prime Minister Bettino Craxi encouraged Italians to "go to the beach" instead of vote in a referendum in 1991 that then reached a quorum promoting a change to the electoral system, a miscalculation that hurt him politically.

 

Renzi is also taking a risk over Sunday's vote. The head of Italy's constitutional court says citizens have a duty to cast a ballot, and President Sergio Mattarella has made clear he will vote, putting the premier at odds with institutional leaders.

 

For those tempted to answer Renzi's call, Sunday's weather forecast is mostly sunny, favouring perhaps a seaside outing.