Cruise ship fallout hits oil and gas producers Italy's oil and gas industry - including large international companies - has become an unexpected casualty of the sinking of the Costa Concordia cruise liner. Parliamentarians and industry sources say Mario Monti's technocratic government has caved in to pressure from environmental lobbies worried about a serious oil spill from the ship by withdrawing planned legislation that would have eased restrictions on mineral exploration and production in Italy. "The government gave in to WWF and Greenpeace," Stefano Saglia, head of the industry committee in parliament's lower house, told the Financial Times. He described limits on exploration off Italy, which had been imposed in the wake of BP's Macondo oil well disaster in the Gulf of Mexico in 2010, as "absurd." The legislation was to have been included in a sweeping decree on liberalisation passed by the government on January 20, a week after the cruise liner sank off the island of Giglio. Environmental groups linked the two unconnected developments, arguing that Italy was failing to protect its marine resources. Greenpeace protested that, with "critics around the world" questioning Italy's credibility over the cruise liner disaster in the middle of a marine sanctuary, Mr Monti's government was planning "another assault on the sea" by relaxing oil and gas restrictions. Corrado Clini, environment minister, said rumours of legislation were "groundless" and that protection of the seas was "paramount in our work in these days." A day before the decree was issued, his ministry also denied permission to ADX, the Australian oil group, to explore off the Sicilian island of Pantelleria. The centre-right People and Liberty party, led by Silvio Berlusconi, former prime minister, will seek to reintroduce the legislation when the decree comes before parliament. However, the main centre-left Democratic party is opposed to changes. Italy produces about 9 per cent of its combined oil and gas needs. Most oil comes from the southern region of Basilicata, Europe's largest known onshore oil field, and about 75 per cent of gas from offshore. According to lawmakers, the government draft in favour of the changes had noted that Standard & Poor's, the rating agency which downgraded Italy last month, had upgraded Israel last September on the basis of future gas production. It also noted that the post-Macondo restrictions had cost Italy valuable investments, for example from ExxonMobil. Mr Saglia said the proposed law could have doubled Italy's oil and gas output, onshore and offshore, and created more than 30,000 jobs. In a separate development, Italy's council of state, a consultative body on legislation and administration, issued an opinion on January 20 which gave a strict interpretation of the 2010 restrictions imposed by Mr Berlusconi's government that banned exploration and future production within five miles of the Italian coast and 12 miles off vaguely defined "protected areas." Industry sources described the ruling as a "killer blow" which could, for example, affect Eni's existing gas operations in the Adriatic Sea. State-controlled Eni declined to comment. Mr Saglia acknowledged that the 2010 restrictions - the most stringent imposed in Europe following BP's disaster - had been a "mistake" on the part of Stefania Prestigiacomo, then environment minister, that had blocked many companies, including Eni, Shell of the UK and ExxonMobil. The government's proposed legislation would have reduced the 12-mile limit to five miles and given a more precise definition of protected areas. "Italy has the potential to double its current production of gas, and cover as much as 20 per cent of its needs for 20 years," commented Marco Arcelli, head of upstream gas at Enel, the Italian power utility that has started investing in gas exploration and production. "But the industry slowed to almost a halt in the past decade," he said, noting that only three exploratory gas wells were drilled in 2010, compared with 20 in 2000.