Underneath the groves that make southern Italy the world’s second-largest olive oil producer, geologists have found a more lucrative liquid: Europe’s biggest onshore crude oil fields.
Basilicata, a mountainous, sparsely populated province that sits in the arch of Italy’s boot, holds more than 1 billion barrels, offering the country a weapon to fight a two-year recession. Rome-based Eni SpA and France’s Total SA plan to double production raising Italy’s output to almost 200,000 barrels a day, making the country Europe’s third-largest oil producer behind the U.K. and Norway.
Since the fields started production in the 1990s, their development has been held back by environmental campaigns and bureaucratic delays. Those impediments are falling away, analyst Carlo Stagnaro said, because the priority for Italy’s government is kick starting an economy that’s shrunk for six straight quarters and where more than 35% of young people are unemployed.
“This is a giant field, so there’s huge potential here,” Claudio Descalzi, Eni’s head of exploration and production and president of Italy’s Oil and Mining Industry Association said in an interview. Italy spends as much as 60 billion euros ($78 billion) on oil and boosting production can save about 5 billion euros and create around 20,000 jobs, he said.
The Italian government’s 2012 national energy strategy sets increased oil and gas production as one of its goals. Former Prime Minister Mario Monti gave Total the green light for its new Tempa Rossa field in Basilicata last year, and Eni and local authorities are in talks to increase production in the region’s Val d’Agri.
Italy, which is combating its longest recession in more than two decades, hasn’t been an oil rich country. It produces about 101,000 barrels a day, about 7% of total consumption, mostly from Basilicata with the addition of some onshore and offshore wells in Sicily and parts of central and northern Italy, according to 2012 statistics from the U.S. Energy Information Administration.
“Talk of freedom from energy dependence is an overstatement, but increasing production can certainly be an opportunity for Italy,” said Stagnaro, head of research at Instituto Bruno Leoni, which studies the Italian economy. “The real point for Eni is whether, after respecting all the laws and health and environmental requirements, the gain is worth the costs, if so then they need to forge ahead.”
Environmentalists and citizens’ associations have periodically pushed local authorities to declare moratoriums on further drilling and lobbying contributed to the creation of a national park in the Val d’Agri in 2007 which further hampered drilling. There are 13 wells within the park’s territory, all sunk before 2007, according to Eni.