Shares in Sound Oil (LON:SOU) jumped by a fifth as it confirmed permission has been granted to restart gas production at its Rapagnano field onshore Italy.
The company, which also has assets in Indonesia, said that the Environmental Impact Assessment was passed by the Marche regional authorities, with final approval expected from the Italian Ministry of Economic Development in around a month.
After this time, operations at the site will resume with the aim of achieving first production by the end of 2012.
“Rapagnano represents a key strategic milestone of achieving first revenue for Sound Oil,” said chairman and chief executive Gerry Orbell.
“We are pleased that the key environmental approvals in the application process have now been granted and that the project is progressing to the expected schedule.”
Italian engineering firm CSTI was appointed to help out with the project and will provide 52% of the total development capital costs under a funding contract.
Based on the most likely remaining P50 reserves of 1.3 billion standard cubic feet of gas (Bscf), CSTI will receive 52 percent of the net cash for a period of 30 months from first gas Sound said in August.
Sound Oil added that it is putting the finishing touches to contract details with a local gas distributor to sell the gas via the nearby pipeline system at a seasonally adjusted average price of $11.30/Mscf for the first year of production.
The project is estimated to achieve payback in approximately 12 months in the base case.
The Rapagnano field, located in the Fermo Province of the Marche region, was discovered in 1952 and produced 4 Bscf gas from the Pliocene interval until 2001, when the well was shut down because of water influx from the upper of two separate gas-bearing reservoirs.
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