The Times15 Jul 2013 12:49
The Times
Trade Secrets: logic vanishes in hour of need
15 July 2013
Gary Parkinson
Before loading up on shares in companies listed in London, but doing their business in the hotter corners of the world, it’s an idea to weigh first what the pros call “political risk”.
Tricky to quantify, this is City-speak for the chance that coup, revolution or war, change of government or prevailing political wind throws a whopping great spanner in the works.
When some fat sweaty bloke piloting a 4x4 with a chest-full of medals he never won, boards on his shoulders, braids on his cap and a handlebar ’tache turns around and says your boys don’t own that mine after all, regardless of legitimacy, it can have a most unsavoury effect on your investment.
A generalisation about generals, admittedly, but this sort of malarky tends to be the preserve of banana republics, where Big Men running rinky-dink governments can still call the shots to suit personal agendas.
Weigh political risk, then, before backing businesses in parts of Africa. In certain South American countries.
Or in Italy . . .
Hard to believe, but true, nevertheless. There is a British company, with decent management, backed by reputable investors wanting to put money into a country in deep financial trouble at the heart of Europe being thwarted at every step.
Mediterranean Oil & Gas, quoted on AIM, known simply as MOG, owns the Ombrina Mare field. About 40 million barrels of oil and 6.5 billion cubic feet of gas sit four miles off Italy’s Adriatic coast under 20 metres of water.
Back in 2008, wells were sunk and the necessary paperwork lodged with the Italian Government. Then BP’s Macondo exploded, bleeding four million barrels of oil into the Gulf of Mexico in 2010. Afterwards, Italy was not alone in banning offshore drilling.
Restrictions were lifted in August last year and MOG looked good to go. Before Italian politics intervened. In federal elections this year, the populist Five Star Movement mopped up roughly a quarter of the vote among a disillusioned Italian electorate. Campaigning on an environmentalist ticket, it’s fair to say M5S isn’t the biggest friend of big oil and gas.
Now, with local elections looming at the end of this year or early next, the last thing Italy’s old guard want is to endorse projects that might be seen to dent their green credentials.
The Italian operations of not only MOG but also of Royal Dutch Shell, BG Group and Petroceltic International are being stymied at the local level on the pretext of environmental impact. No matter that in MOG’s case this will be minimal.
On Wednesday, its predicament will be raised by David Cameron in a meeting in Downing Street with his opposite number, Enrico Letta, as the two leaders discuss ways to stimulate the ailing Italian economy.
A couple of thoughts:
• Italy spends up to $78 billion annually on oil and gas impo
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