Lasmo to sell Italian assets

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LASMO, the debt-laden oil explorer, has informally put up its important Italian assets for sale as part of a sweeping review of operations in that country. They could be worth up to dollars 70m ( pounds 47m).

The interests include a key 30 per cent stake in the Tempa Rossa field in southern Italy, which is thought to contain about 200 million barrels of oil.

However, its commercial development is likely to be fraught with technical difficulties. The field contains heavy crude - which is harder and more expensive to extract than others - and is also located in a remote, mountainous region with little supporting infrastructure.

As a result, Lasmo is understood to be debating whether to risk a massive investment in the project, or to pull out of Italy altogether. Although the company owns interests in 13 Italian blocks, Tempa Rossa is by far the most significant in its portfolio.

Industry experts say the disposal would both enable it to save on future spending, and also raise between dollars 50m and dollars 70m at a time when it is struggling with an estimated pounds 900m debt burden.

News of the possible sale has emerged at a time when Lasmo is holding talks with several other oil groups to develop Tempa Rossa alongside other significant new fields in the region, such as Monte Alpi.

One of the biggest overseas players in the region is the UK-based Enterprise Oil, which owns about 20 per cent in Tempa Rossa and 40 per cent in Monte Alpi. Experts believe that it would be one of the leading contenders to bid for Lasmo's assets.

The others include Petrofina, the Belgian oil refiner, and Agip, the Italian state-owned oil giant. Both have a substantial involvement in the area.

All five are currently holding joint studies to assess the area's commercial potential. 'A lot of oil has been found but it is still difficult to establish how much can be taken out economically. A concerted effort is now being made to decide what should be done,' a source with close knowledge of the projects said.

A key question concerns the transport of crude from the production sites. Limited quantities currently produced at Tempa Rossa are moved by road tankers. But its full development, which could take about five years, may require the construction of a 90km pipeline to a refinery at Taranto.

Joe Darby, Lasmo's chief executive, told shareholders last week that the group was adopting a more conservative approach to oil exploration and development to improve its financial performance. It made a pounds 385m loss last year thanks to the ill-fated pounds 1bn takeover of its rival Ultramar in December 1991.

Since then the shares have collapsed from about 300p to 153p last Friday. They are expected to be listed in the US in ADR form in the next few days.

The company also raised dollars 350m in a bond issue last week.