Oil Exploration in Basilicata, Italy

The European Investment Bank has supported the development of two large onshore oil deposits located in the southern Apennine mountains of the Val d'Agri area in southern Italy. The EIB has also supported the construction of a new 150 kilometre pipeline from the“Monti Alpi” oil storage plant to the coastal city of Taranto.

Between 1996 and 2000 the EIB's loans for these oil developments totalled 607 million euros. The projects are mainly led by the Italian oil company ENI/Agip as well as Enterprise Oil Italiana SpA that has formed a joint venture with ENI. It is expected that these oil fields will be operational until 2022. These exploitations aim to increase production from 7 000 barrels per day to more than 100 000, ultimately meeting 11 percent of Italy's domestic oil demand. H2>Violation of national and EU laws

The area where this exploitation has been taking place takes in the well-preserved forests and protected areas of the Appenini mountains. These protections are mandated under law 394 from 1991 and include part of the Val d'Agri National Park, formally established in December 1998 with a deadline of June 1999 for demarcating the area. However, Italy's Ministry of Industry gave licenses to ENI to open new wells and to carry out oil explorations in the same year. At the same time, some areas protected under EU directives 92/43 and 79/409 are located within the Val d’Agri National Park area, specifically in areas affected by drilling operations. Now with decreased boundaries, the park was established by Presidential decree of 8 December 2007. However it still lacks management bodies in order to protect its own interests.

Geo-seismic operations carried out by ENI since 1999 started without an adequate environmental impact assessment (EIA) study. The exploration operations have heavily impacted local communities, with water wells drying up and houses being damaged.

The EIB claims that adequate EIA documentation was prepared by ENI, and that this was available for public consultations. However, local communities argue that such documentation and such consultations were never made public prior to the exploration activities, in particular for those areas lying in the Val d’Agri National Park. Nor were the necessary oil spill response plans and an evaluation of seismic risks in the valleys and along the pipeline route submitted for public scrutiny. While EIAs for already functioning wells were ultimately approved, local people maintain that a security and evacuation plan to deal with an oil spill emergency has never materialised.

Environmental and social impacts

The intensive oil extraction now going on in the region is contributing to a clear degradation of local fauna and flora. The extraction methods are causing a lowering of the groundwater table, which has triggered hydrological changes. Such effects are not always easy to predict but may have far-reaching consequences for the region's future. In addition, Basilicata's renowned agricultural products such as olive oil are at risk because of the concentration of industrial chemicals that ENI's activities have brought to the region. Understandably local people view this as a huge barrier to the development of agriculture and tourism in the region.

WWF Italy argues that oil extraction in the region has “a high environmental impact, in all its phases, research, processes, transport and refining, with serious risks to air pollution (emissions of nitrogen, hydrocarbons, sulphur dioxide), pollution of groundwater, the hydrological disruption, the seismic risk, not to mention the problems related to waste disposal and impacts on biodiversity”.

Indeed the smell around the Viggiano oil plant and pipeline to Taranto, derived from polycyclic aromatic hydrocarbons and hydrogen sulphide, is direct evidence of the oil industry's contribution to the region. In addition, a number of serious accidents, including a 15 tonne spill over the Agri river bed and the surrounding fields, as well as an oil spill in the Viggiano oil centre followed by the release of high pressure gas, has further raised public health fears.

According to the EIB, the major social impact of the project has been the creation of local jobs. ENI cited figures varying from 150 to around 1000 people that, it said, would be indirectly linked to the project. Yet nowadays unemployment in the area remains a problem. In fact there is a clear lack of funds to invest in local small and medium size businesses, and the regional population has dropped by a quarter in the last 15 years.

Who benefits?

The first oil drilling operations in the Basilicata region got underway early in the twentieth century. In recent years, oil extraction activities in the region grew rapidly, covering roughly 80 percent of the whole area.

ENI has secured concessions in four areas in the region, giving it the potential to achieve total production of 4.5 million tonnes per year. In a number of cases the oil extraction operations are still not covered by any regional production sharing agreement. There have been strong concerns -- related to non-transparency and in some cases to alleged corruption -- voiced about the quantities of extracted oil and the fair distribution of revenues.

The royalties regime in the region is in fact the lowest in the world at 7 percent for onshore oil or 4 percent for oil extracted in the sea. Eni claims that it has already paid royalties of 500 million euros to the regional administration of Basilicata, with a potential 2 billion euros more for the coming years for the fields of Val d'Agri. It also signed a 1998 agreement with the Basilicata regional administration to invest 180 million euros for 11 projects, including an environmental monitoring system, an environmental observatory, a regional energy utility and a sustainable development plan.

However, to date, almost none of these commitments have been implemented. In September 2008, WWF Italy launched a campaign demanding ENI to start “an operation transparency (un’operazione trasparenza)”. The concerns relate to various issues, including the quantity of extracted crude, the procedures and the results of environmental monitoring, and problems with toxic muds and waste.

Dialogue with NGOs and local stakeholders

The EIB claims to be engaged in a dialogue with NGOs who have shown a particular interest in the Val d'Agri project and has discussed the project among others during a roundtable. However, it did not consult NGOs prior to the decision-making nor has it given the public the chance to express concerns during the project implementation. The EIB in fact declined a proposal from Italian NGOs in 2002 to undertake a joint mission to respond to the projects' shortcomings that have been picked up by independent monitoring. The response was that the EIB's mission had been completed and that there would be no need for a further mission.