Po Valley nears maiden production

Perth-based gas company PO Valley Energy is a step closer to first production at its Italian project, following the completed connection to the country's gas distribution network.

The company said today that the SNAM Rete Gas, Italy's national gas pipeline grid operator, had completed construction of a pipeline connecting Po Valley's Sillaro field to the national grid.

"This marks a major milestone in progress to put the Sillaro field into production," Po Valley chief executive Michael Masterman said.

"The connection follows closely on last month's grant by the Italian Government of a 20 year Production Concession for Sillaro."

The pipeline grid connection, constructed in just eight weeks, was completed at SNAM's cost.

Gas entering the SNAM pipeline grid can be transported to the Italian gas market which consumes 2.9 trillion cubic feet per annum - three times the Australian market.

Prices at around $14 per thousand cubic feet are a multiple of Australian gas prices and transportation costs are very low.

Following the grant of the Sillaro production concession, Mr Masterman says the company now expects to proceed with installation of the surface plant at Sillaro in the third quarter of 2009, enabling connection of the plant to the newly installed pipeline grid connection.

"We are now rapidly building momentum towards maiden gas production," Mr Masterman said.

"As gas transportation costs in Italy are very low and as we hold gas reserves in one of the largest gas consumption markets in Europe, this combination of factors is a major financial and strategic advantage for Po Valley."