Rockhopper Exploration (LON:RKH) has confirmed that law changes in Italy mean that a production concession will not be awarded for the Ombrina Mare field.
It told investors that Ombrina Mare had all necessary technical and environmental authorisations, however, the project won’t go ahead due to the re-introduction of a ban on exploration and production activity within 12 nautical miles of the Italian coast.
The company said it is now considering its options, which could include a claim for damages and compensation from the Republic of Italy under international treaties.
Meanwhile, the company said that none of its other interests in Italy, including the Guendalina gas field, are expected to be impacted by the changes in legislation.
Rockhopper acquired its Italian portfolio in the 2014 takeover of Mediterranean Oil & Gas, which initially cost £29.3mln.
It came as Rockhopper moved to diversify its portfolio, which at that time comprised solely of its Falklands operations.
This new regulatory problem marks another disappointment for the Mediterranean unit. Shortly after the deal completed in 2014, an exploration well offshore Malta was abandoned as it failed to find hydrocarbons.
More recently at Guendalina, in the Northern Adriatic Sea, a side-track well was successfully completed and all targeted reservoirs were seen to be gas bearing.
Guendalina was producing around 440,000 standard cubic metres (scm) of gas per day gross, in late 2015, which amounts to 88,000 scm or 580 barrels oil equivalent per day to Rockhopper. The company expects to generate around US$7mln of revenue from the field in 2016.
In November, Rockhopper announced the start of production from the Civita gas field which is adds about 25,000 scm or 160 barrels of oil equivalent (boe) production per day. Together with Guendalina, Rockhopper expects revenues for 2016 will amount to around US$9mln.