Page 6 - GLNG Week 35 2021

GLNG COMMENTARY GLNG

Italy could reap gains by expanding

its LNG import capacity

Extra LNG could help Italy make its energy cleaner and cheaper, especially given difficulties

in developing more renewable energy

PERFORMANCE ITALY could stand to benefit from increased
LNG import capacity, in order to further cur-
WHAT: tail its use of oil and coal, diversify its import
Italy is mulling an options, increase competition and meet rising
expansion of its LNG demand, especially given the country’s difficulty
import capacity. in developing more renewable energy.
Italy took 12.1bn cubic metres of LNG in
WHY: 2020. Yet LNG accounts for a relatively small
Comparatively high share of gas use in the country, one of Europe’s
prices indicate that the largest gas markets, contributing only 17.8% in
market could do with the 2020. The rest was covered by pipeline imports that runs from Austria and the TGP pipeline
increased competition and its relatively small domestic supply. from Switzerland. It took a further 11.5 bcm from
that these projects would Italy was an early developer of regasification Algeria, using the Trans-Med pipeline, along
bring. Extra gas would capacity, becoming the fourth country in the with 4.2 bcm from Libya, via the Greenstream
also ensure that Italy world to commission an import terminal, the system. Some 5.4 bcm also came from Norway
phases out coal and 2.5mn tonne per year (tpy) Panigaglia LNG and 1.6 bcm from the Netherlands, while 8.4
oil-fired power capacity facility, in 1971. This allowed it to tap supplies bcm was obtained from other producers.
as planned. from the Marsa El Brega LNG export plant on Italy also began receiving supplies from
the other side of the Mediterranean in Libya. But Azerbaijan at the start of this year following
WHAT NEXT: it was not until 2009 that Italy added its second the completion of the Southern Gas Corridor
Projects with a combined import terminal, the 5.8mn tpy Adriatic LNG. (SGC) system.
capacity of 24bn cubic And the third, the 2.7mn tpy Toscana FSRU, was Despite this diversification, however, Italian
metres per year have added in 2013. gas prices are relatively high for Europe, indi-
been proposed, but no National regasification capacity therefore sits cating a lack of competition. Gas from the TGP
investment decisions at just over 11mn tpy. And in recent years, Ita- is typically priced at a premium to rates at the
have been taken. ly’s terminals have been operating at utilisation Dutch TTF hub, because of how limited supplies
levels that are comparatively high for Europe, are. And other pipelines must be used at high
thanks to an auction-based allocation mecha- utilisation rates to ensure that prices are not too
nism introduced in April 2018. According to the high.
International Gas Union (IGU), utilisation same What is more, a handful of big players control
to 82% in 2020, which was the second-highest the bulk of Italy’s imports, of which the largest
level in Europe behind Belgium with 90%. In is Eni. Hindering competition further, the TGP
comparison, utilisation in France came to only pipeline is not governed by EU antitrust rules, as
66%, while in Spain it was 37% and in the UK it runs through Switzerland, and deliveries from
it was 38%. Gazprom are made under a long-term contract
Likewise, regasification capacity as a propor- that does not expire until 2023.
tion of overall gas consumption is comparatively If Italy needs more gas to improve compe-
low at 22.1%, versus 33.4% for the Netherlands, tition, the answer does not lie in increased
71.5% for the UK and 83.5% for France. pipeline imports. Neither Algeria nor Libya
can offer additional volumes, and given that
Lack of competition Russia is already the top supplier, taking
Europe’s gas markets can differ greatly, and Italy’s more volumes from Gazprom does not seem
relatively small import capacity compared with sensible. Supplies from Azerbaijan are antic-
consumption is not cause for concern on its own. ipated to rise to as much as 8 bcm per year
Indeed Germany, the EU’s biggest gas consumer, once the Trans-Adriatic Pipeline is working
is yet to complete even one regasification facility. at full capacity, and this should help bring
Italy also has a fairly diverse set of options down prices. But Italy will need to look at fur-
when it comes to pipeline imports. Its biggest ther expansions in capacity to meet growing
supplier is Russia’s Gazprom, which delivered demand, especially if it is serious about phas-
19.7 bcm of gas last year via the TAG pipeline ing out its remaining coal capacity.™

P6 www. NEWSBASE .com Week 35 03•September•2021