Europe & Russia LNG / LPG News
Italy Seeks Gas Hub Status But Faces Strong Competition
by AFX News Limited
February 22, 2008
Plans for Italy to become a gas hub for Europe
are realistic long-term as gas grid operator Snam Rete Gas SpA gears up to
accommodate a series of big gas infrastructure projects, but timing is important
if competition from countries like Germany is to be overcome, analysts said.
"For Europe, Italy is at the crossroads for gas from North Africa, the
Middle East and the Caspian but with Germany and Austria-Hungary fast building
import gas capacity of their own with projects like Nord Stream and Nabucco it
will be a race of who gets there first as a hub," a London-based energy analyst
At the recent presentation of its 2008-2011 business plan, Snam RG chief
executive Carlo Malacarne said gas demand and hub operations will be the major
growth drivers for the group in years to come.
"Our geographical position vis-a-vis Africa, the Middle East and the
Caucasia area, as well as our existing links to Russia and North Europe, make
Italy a major gas channel to Europe for gas," Malacarne said.
According to Snam RG, 2007-2020 gas demand in Italy is expected to grow at
more than 2 percent per year from 86.7 billion cubic meters in 2007 to around 114 billion in
2020, driven mainly by the power generation sector.
European gas demand is seen growing at 2.1 percent per year to around 700 billion
cubic metres in 2020 with imports growing 4.9 percent as domestic production falls.
Italy, whose gas supplies are currently very tight, is expected to be in a
situation of excess capacity in the coming years if four planned gas pipeline
projects and a series of liquefied natural gas terminals get built.
The 8 billion cubic metre GALSI gas pipeline project (due for completion
2012-2013) will transport Algerian gas through Sardinia to the Italian mainland
while the 8 billion cubic meter IGI pipeline (end 2012) will transport Azerbaijan
gas via Greece.
The 10 billion cubic metre TAP pipeline (after 2011) will carry gas from the
Caspian and Middle East to Italy, while the 30 billion cubic meter South stream
pipeline will first cross the Black Sea into Bulgaria and then split into two
arms, one to Austria and the other south to Greece and southern Italy.
Eni SpA also has plans, starting this year, to upgrade the capacity of its
import pipelines carrying Algerian and Russian gas by an overall 13 billion cubic
"Italy could be the ideal hub since it can guarantee a diversified gas
supply portfolio which could clearly help supply security in Europe while
Germany is dependent on Russian gas," said Claudio Arcudi, director of the
Italian utilities division at Accenture.
Arcudi, who noted that growing gas demand in Europe will be fuelled also by
falling gas production in the North Sea area, warned that complex permitting
regulations could hold up, or even discourage, the actual construction of energy
infrastructure in Italy.
"The gas hub issue should at least make the government reflect on the
opportunities we are continuing to lose," he said.
An energy analyst at ABN Amro said the permitting process for liquefied
natural gas (LNG) is particularly onerous, noting that LNG is especially
important for the development of a gas spot market.
"It's so difficult that until that is resolved any talk of a hub is
fanciful. And remember, Spain isn't a hub and it has 5 LNG terminals," he said.
Italy has over 13 projects on paper to develop LNG terminals but to date
Snam RG operates the country's only operative plant at Panigaglia.
An 8 billion cubic meter facility being developed by Edison SpA and partners is
under construction and could be operative at the end of the year, while a
smaller facility at Livorno being developed by Iride SpA and Endesa SA has been
The forecasts of Snam RG's business plan include an 8 billion cubic meter LNG
plant planned by Gas Natural in Trieste, which is still seeking regulatory
clearance, as well as another unnamed facility in the south of Italy.
Analysts said Snam RG has told them the southern plant is an 8 billion cubic
meter plant being developed by Enel in Sicily, which is close to completing the
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