Italian oil and gas prospection and exploration halted - an update

Players involved in the exploration and production of oil and gas in Italy might be affected by recent legislative developments that are likely to preclude such activities. In this briefing we provide an update on the current situation in Italy.

2019 Italian moratorium on oil and gas prospection and exploration 

By Law Decree No. 135/2018, converted into Law No. 12/2019 and effective as of 13 February 2019 (the Decree), a moratorium on oil and gas prospection and exploration activities was imposed in Italy while the Italian Government sought to conclude a plan to promote environmental, social and economic sustainability in the country's energy exploitation activities (the Plan).

As we explained previously (see our article), depending on what form the Plan ultimately takes, operators in the Italian energy sector may find their prospection and exploration permits revoked (and applications for such permits and/or for production concessions rejected) and be able to seek redress under Italian law, EU law, or public international law. 

Current legislative framework

The Decree was further amended by later laws enacted in 2020 and 2021,¹ which:

• extended the moratorium to 30 September 2021;
• capped the maximum amount of the concession fees due for all concessions owned by a single concessionaire, which now cannot exceed 3 per cent of the value of the production obtained by that concessionaire in the preceding year; and
• expressly allowed the installation of plants for the production of energy from renewable sources in the areas in which oil and gas exploration and production will no longer be permissible according to the Plan.

The moratorium has now ended, but the Plan, although in its final stages, has not yet been approved. 

Pending the Plan's final approval, the newly appointed Ministry of Ecologic Transition has stated that it will not authorise any new mining and exploration activity.²

What next?

With the moratorium no longer in force, operators could technically restart the activities that have to date been on hold. However, whether that in practice happens, or operators remain cautious and wait for final approval of the Plan remains to be seen.

Further delays in securing approval may result in challenges to the Plan's validity, and operators and investors will no doubt be considering their next steps, including whether there is any scope to recover the losses incurred during the moratorium period. 

Amendments to the legislation to permit the installation of renewable plants in the non-compatible areas may prompt existing oil and gas businesses to transition to, or otherwise invest in, renewables (or speed up decisions to diversify in such manner). It is essential that those players carefully consider whether any such investments will benefit from treaty protection (or can be structured to ensure that they are) so that protections, including rights to compensation in the event of subsequent regulatory or legislative changes which potentially amount to expropriatory action or otherwise negatively affect the benefit of such investments, can be enjoyed.

If you want to discuss any of the issues raised in this briefing, our team is perfectly placed to advise on potential rights and entitlements under Italian law and international law. 

1. Amendments to the Decree were inserted, among others, by laws No. 8/2020, 120/2020 and 21/2021.
2. See the statements published on 30 September 2021 on the MITE official website.