Energy

Crude Trumps Olive Oil in Italy's Basilicata Region


An oil rig, operated by Eni, in Val d’Agri in Basilicata

Photograph by Alessandra Migliaccio/Bloomberg

An oil rig, operated by Eni, in Val d’Agri in Basilicata

When executives of Italian oil company Eni (E) look out over the verdant hills of Val d’Agri, their primary focus isn’t on the ancient olive groves that cover the valley’s flanks but the billion-plus barrels of crude that lie beneath. Marco De Biasi will take the olive oil. “We need to stick to things that will still be with us once all the oil is pumped out,” says De Biasi, head of the regional branch of Legambiente, an Italian environmental group. “Sustainable development, real career paths for our children. Not exploitation, money, and then goodbye.”

The Val d’Agri lies in Basilicata, a mountainous, sparsely populated province in the arch of Italy’s boot that is home to Europe’s biggest onshore oil field. Eni and many in the government see the reserves there as a way to boost a battered economy that has shrunk for seven straight quarters, pushing the youth unemployment rate above 36 percent. “The potential of this field is huge,” says Ruggero Gheller, Eni’s Southern Italy chief, as he looks out from a mountain ridge where the company put in its most recent rig. “Having national production is important to contribute to our needs.”

As part of an energy strategy published last year, the Italian government is seeking to increase oil and gas production. Tapping the new Basilicata field could double Italy’s output of crude from the current level of about 101,000 barrels a day, or 7 percent of the country’s consumption. Italy spends as much as €60 billion ($78 billion) annually on oil and gas imports, and Eni says a production increase could cut that by €5 billion while creating some 20,000 jobs.

To get there, Eni will have to overcome resistance from locals and environmentalists, who are pushing authorities to block any more drilling. After lobbying by environmental groups, the government in 2007 created a national park in the upper part of the Val d’Agri, which stopped production inside the park beyond the 13 wells already there. “We’re open to new drilling only if new technologies guarantee no further air pollution and if Eni promises to create jobs,” says Giuseppe Alberti, mayor of Viggiano, a sleepy town of 3,300 that is home to an Eni oil processing plant.

Eni and partner Royal Dutch Shell (RDS/A) produce 85,000 barrels of oil a day in the Val d’Agri and have permission to raise production to 104,000 barrels. To the east lies the Tempa Rossa field—owned by Shell, French oil company Total (TOT), and Japan’s Mitsui (8031:JP)—which the companies say will pump 50,000 barrels a day by 2016. Eni is in talks with local authorities to increase output by an additional 25,000 barrels a day, and the company says production could be raised by 20,000 more barrels. That would make Italy Europe’s third-largest oil producer, behind Norway and Britain.

Viggiano has long been at the heart of the Italian oil patch. Small amounts of shiny crude bubble up from a natural spring just outside town, and puffs of natural gas make the area smell more like a service station than the green woods around it. The town is home to the Madonna of Viggiano, a medieval statue that according to legend was found by shepherds drawn to the spot by mysterious fires in the night. “Let’s say that in God’s mind, it was all already written,” says Viggiano’s priest, Don Paolo, who considers the prospect of more oil “an opportunity for development” of the historically poor area.

Eni gives a share of its revenue from local production to Basilicata and towns where wells are located, which the company says totaled €585 million between 1998 and 2012. Viggiano alone received about €15 million last year. That kind of money is likely to trump environmental concerns, says Carlo Stagnaro, an energy researcher at Istituto Bruno Leoni in Milan, which studies the Italian economy. “Talk of freedom from energy dependence is an overstatement, but increasing production can certainly be an opportunity for Italy,” he says.

Both Eni and an independent regional authority regularly monitor the air, water, and soil of the Val d’Agri. And the company has tried to make its rigs less visible, putting covers around parts of them and painting equipment in soft green colors that blend with the landscape. That’s not good enough for environmentalist De Biasi. “We don’t need green skirts on wells,” he says. “We need to stop drilling.”

The bottom line: Italy’s Eni is increasing oil production in the country, which could help cut crude imports by €5 billion a year.

Migliaccio is a reporter for Bloomberg News in Rome.

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Companies Mentioned

  • E
    (Eni SpA)
    • $50.78 USD
    • -0.02
    • -0.04%
  • RDS/A
    (Royal Dutch Shell PLC)
    • $81.41 USD
    • -0.42
    • -0.52%
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