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Sillaro, in the Crocetta licence area east of Bologna, is the Company's largest natural gas field discovered to date. The field was originally explored by ENI between 1955 and 1982 with seven wells drilled in and around the structure. The field contains gas bearing zones in the Pliocene level at a depth of 2,100 metres. The deepe rMiocene level, at a depth of 2,500 metres, was previously drilled by ENI and found to have a gas bearing reservoir.
Po Valley successfully drilled and tested Sillaro-1dbetween November 2005 and January 2006, identifying three gas bearing levels over a 100 metre gross intervalin the Pliocene sequence. Each of the levels was successfully tested. This test work, the associated reservoir simulations and development analysis, confirmed a commercial gas field development. Flow rate testing of the three productive layers produced at up to 5.4, 4.0 and 3.0 mmcf/d respectively.
The Company is progressing its plan to put this field into commercial production. Environmental approval was granted during January 2008 and in November 2008, PoValley was granted a 20-year production concession over this field. SNAM completed the connection to the pipeline grid,300 metres from the Sillaro well head, at its cost, in December 2008. The construction contract for surface gas treatment plant was awarded to Italian contractor Semat in 2007 and the plant has been completed on schedule within budget.
Po Valley drilled a second well, Sillaro-2, into the Pliocene gas reservoir and this well is designed to produce from multiple levels to increase overall flows rates and optimise total field recovery. The well has been completed at the end of August safely, on budget and schedule to a target depth of 2364m. The Sillaro-2 well has not only confirmed the production capacity of the field but added new gas production levels.
The production plant should be mechanically complete in late January with commissioning operations scheduled for a February 2010 start.
Plans are also well advanced to exploit the deeper Miocene structure beneath the Sillaro gas field. A total of 50 kilometres of seismic data were purchased during2006 and reviewed to confirm the size and structure of the Miocene target and a drill location for this well, Fantuzza-1, has been selected. The planned 2,600 metres deep Fantuzza-1 well will be Po Valley's first test of this deeper structure, previously successfully drilled and tested by ENI. The Company is awaiting final environmental approvals, with the well expected to be drilled following production and cash flows from Castello and Sillaro. The surface plant and pipeline connection at Sillaro has been sized to take advantage of success atFantuzza-1, located about two kilometres from the Sillaro field production site.
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