Po Valley had spun out its northern Italian gas assets to Saffron Energy by listing it on the London Stock Exchange Alternative Investment Market (LSE AIM) last month.
Saffron’s portfolio includes one gas production (Sillaro) and two near-term gas production fields (Bezzecca and Sant'Alberto) near Milan and Bologna.
Saffron has already been supplying Shell Energy Italia with natural gas for the last four years.
The new contract has been extended to October 2018, with an option to extend it for a further year to October 2019.
The Italian gas market is considered a premium pricing market compared with other international markets, with the spot price now trading at around €0.1944 per cubic metre.
The market is attractive due to the high-quality gas produced, a low-cost transportation network and a pricing environment that is more stable compared to other European countries.
Italian spot gas prices have risen significantly over the last 12 months from €0.14 per cubic metre to around €0.20 per cubic metre.
Selling gas in the Italian gas market allows Saffron to take advantage of the premium prices and use Shell’s extensive gas supply network throughout Italy.