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The town of Matera in Italy’s Basilicata region. Energy companies are increasing looking to invest in the Basilicata area, which holds the bulk of Italy’s 1.4-billion barrels of proven reserves.

NADIA SHIRA COHEN/NYT

Shale gas development is moving slowly in Europe and is going in reverse in some countries, like Poland, whose gas developers are hitting the road. But a European energy rush of another sort – oil – is under way and it's not in the North Sea. It is in Italy's far south, a region best known for soaring unemployment, dying mountain towns, olive orchards and tourists who are weary of the twee towns of Tuscany.

The region is known as Basilicata, which forms the "instep" of the boot of Italy, on the Ionian Sea. According to the BP Statistical Review, the region holds the bulk of Italy's 1.4-billion barrels of proven reserves, the third largest on the continent, after Norway and Britain, which share the North Sea's (declining) reserves. Italy's reserves make them Europe's biggest on-shore store of oil.

With Italy struggling to bring down its 12.7-per-cent jobless rate – a shocking 42 per cent among youths – the national and regional governments are keen lure investment into the underdeveloped south and a few of the biggest oil companies are drawing up Basilicata investment plans. They include Italian national oil giant ENI, whose traditional stomping grounds are in Africa, Royal Dutch Shell, Total of France and Japan's Mitsui.

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According to recent reports from Bloomberg and the Wall Street journal, the goal is to double Italian oil production by 2020. Italy now produces about 112,000 barrels a day, about one-tenth the North Sea's level. But with North Sea production coming down fast, and Italy's going in the opposite direction, the gap should narrow considerably in the next decade or so, even if it will probably never be eliminated. "When I was hired, the mission was: Go out [in the world] and find hydrocarbons for the good of the country," Giuseppe Tannoia, an ENI senior vice-president, told the Wall Street Journal. "I'm finding them in Italy."

Since Italy imports almost all of its hydrocarbon demand, a doubling of domestic production would help the country reduce its energy bill. Undependable production from Libya and other parts of North Africa, where Italy received much of is oil, is another reason why rising domestic output would be welcome news.

According to a new report by Scottish geologist and oil analyst Euan Mearns, oil production from Libya, Syria, Yemen, Tunisia and Sudan has fallen by more than 2-million barrels a day since the Arab Spring revolutions started in Tunisia three years ago. Libyan production – and hence exports – has been especially erratic. Production fell to 220,000 barrels a day in November, according to the International Energy Agency, and may have since climbed to about 600,000 barrels a day. But between 2004 and 2011, Libyan production was consistently greater than 1.5-million barrels a day.

New investment in Basilicata could total billions of euros. Total and Mitsui alone are investing €1.6-billion in a field called Tempa Rossa. Last year, ENI and partner Shell said they were considering a €2.5-billion investment in Basilicata oil production. The Italian government has said a doubling of oil production could generate 25,000 jobs and bring in an extra €3-billion of tax revenue a year.

Basilicata, however, has never taken kindly to oil development. Local opposition to the companies' plans have, on occasion, been well organized. The Italian government bought some peace last year by ensuring that a great share of the royalties would go to local governments. The permitting process was also made easier.

While no Canadian companies are involved in Basilicata, the Mediterranean is attracting Toronto-listed oil companies. The dominant player in the heavy oil fields in Albania, located just across the Adriatic Sea from southern Italy, is Bankers Petroleum. In 2012, its Albanian production averaged 15,000 barrels a day. Rising production is possible, given Albania's potentially vast reserves. While proven reserves as fairly small, Bankers puts the country's potential "resource assessment" at 5.4-billion barrels. Bankers' share price has climbed 56 per cent in the last year, giving it a market value of about $1.2-billion (Canadian).

Shale gas has a lot of potential in Europe, but it appears an American-style shale revolution will never happen on the continent. Italy and Albania are proving that oil is still the name of the game.

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