ADX clinches Sicily gas permit in European energy hotspot

ASX-listed ADX Energy has finally put its foot on one of Europe’s most tantalising offshore gas plays after formally receiving 100 per cent of a high-impact exploration permit covering 346 square kilometres off the western tip of Sicily in Italy.

Fresh from a big in-country oil and gas exploration policy change, Italy’s Environment and Energy Security Ministry has given ADX the green light for gas-only exploration after putting the company’s finances, technical skills and organisational muscle through a thorough health check.

ADX says the potential prize waiting for it on the back of a successful exploration program is a juicy 369 billion cubic feet (Bcf) of gas from five prime prospects.

Historic 2D seismic has hinted at stacked reservoirs with top-notch, 30 per cent porosity at some of the targets and points to the potential of a juicy low-risk, high reward exploration play of cheap drilling coupled with the chance of outsized returns.

The lease sits in shallow waters less than 100 metres deep, just 30 kilometres off Sicily’s shoreline and comes with potential access to the Transmed pipeline, which runs directly past the permit from North Africa to its point of entry at Mazara del Vallo in western Sicily.

The company’s new grounds cover a patch of the Sicily Channel that has been largely overlooked for gas despite historic oil exploration and drilling.

The geology is almost a carbon copy of nearby producing fields, such as Italian energy heavyweight ENI’s Argo-Cassiopea offshore and Lippone-Mazara onshore discoveries, where similar stacked gas sands have delivered hefty resources from compact structural traps.

If ADX’s prospects end up mirroring those at Argo-Cassiopea - which holds almost 360Bcf of stacked gas across two fields in the same Miocene-Pliocene sands - the company says each of its wells could potentially pump out 20–30 million cubic feet of gas a day and notch up about 50Bcf each.

Adding to the buzz, past exploration work has already lit the path. Old seismic and well logs, including those from the Nilde-2 well within the lease, strongly point to 99 per cent biogenic methane, a sweet gas requiring minimal processing. This gas appears trapped in Miocene sandstones between 700 and 2000 metres below surface.

As is the case for the shallow gas play we are pursuing in Upper Austria, the availability of historic, high quality 2D seismic data and production well data has strengthened our confidence in the potential of the Sicily Channel permit. The recent, nearby shallow gas discoveries and field developments by ENI have also opened up the Sicily Channel for gas exploration.

ADX lodged its bid for the Sicily Channel permit in January, hot on the heels of Italy’s long-awaited policy shift that ended a freeze on new exploration licences. The freeze dated back to 2019, when Rome pulled the plug on all hydrocarbon exploration in a bid to cut carbon emissions.

But Europe’s scramble for alternatives to Russian gas after its Ukraine invasion flipped the script. With demand surging, Italy’s new centre-right, pro-gas government under Prime Minister Giorgia Meloni moved quickly to revive domestic exploration, eyeing home-grown clean gas to shore up energy security.

For ADX, the numbers stack up nicely. Robust European gas prices – currently around €34 (A$61) per megawatt – coupled with favourable tax terms of a 10 per cent royalty and 28 per cent corporate tax make the economics of the Sicily Channel permit hard to ignore.

Moving forward, a treasure trove of old wells and 2D seismic, previously aimed at deeper oil, has given ADX a head start in sizing up its new permit.

The company says it’s now ready to hit the ground running by reworking seismic, picking up well logs and fast-tracking fresh 3D surveys, aiming to mature its prospects and secure an independent expert’s tick to highlight the permit’s full gas potential.

All up, ADX’s Sicily Channel prize looks like the real deal - shallow waters, stacked sands, premium pricing and a government that’s suddenly rolling out the welcome mat for gas.

With the groundwork already mapped and the drills not far off, the company now has a golden chance to turn an overlooked corner of the Mediterranean into a serious gas play – and the punters are likely to be watching every move.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au