The EU's REPowerEU plan will pave the way for Italy to deepen its gas ties with Africa, write Alexandra Vladimirova and Antonio Peciccia
EU plans to reduce dependence on Russian fossil fuels could provide an opportunity for Italy to achieve its long-standing ambition to become a European energy hub, Italian prime minister Giorgia Meloni says.
The European Commission's REPowerEU plan, launched in the wake of Russia's invasion of Ukraine, could enable Italy to become a "Mediterranean energy hub for the whole of Europe", Meloni says. REPowerEU will help Italy implement its "Mattei plan", which seeks to deepen Italy's energy and political ties to Africa, with the aim of "consolidating supply diversification" and "move towards a complete elimination of Russian gas", Meloni says, adding that a "fruitful co-operation" with African countries will support Italy's role as a European energy hub.
Italy has long aspired to become an aggregator of supply from Algeria, Libya and Azerbaijan, as well as LNG that could offset dwindling output in Norway and the Netherlands. The country's gas grid operator, Snam, has invested in reverse flow capacity at both its northern entry points — Passo Gries at the border with Switzerland and Tarvisio on the Austrian border — where 40mn m³/d and 18mn m³/d of export capacity are available, respectively, since late 2018. Supply available to the Italian market has also increased in recent years with the commissioning of the 10bn m³/yr Trans-Adriatic pipeline in 2020 and new allocation rules for regasification capacity boosting utilisation of its LNG import terminals since 2018.
Yet Italy's export capacity has only seen minimal utilisation in recent years, as PSV prices have long retained a premium to the Dutch TTF and other European hubs. Near-curve prices at the Italian hub for the first time were below corresponding TTF contracts for a prolonged period in the 2020-21 winter, but they again fell below Dutch prices in mid-summer of that year, and then again from September 2022 until the beginning of this year, this time achieving much more sizeable discounts. Italy's gas exports rose to 4.2bn m³ in 2022 from 1.6bn m³ a year earlier, mostly through the Tag pipeline, Snam's chief executive, Stefano Venier, says. Exports at Tarvisio could rise to as much as 6bn m³ in 2023, he says.
But having largely lost its main source of gas supply — imports at Tarvisio averaged just 7.2mn m³/d in October-December, barely a tenth of the five-year average of 73.2mn m³/d — Italy's ambition to have a sizeable gas surplus that could feed exports may rely on structural demand cuts, even taking into account the planned commissioning of two new LNG import terminals in Piombino and Ravenna, which are expected in 2023 and 2024, respectively. Excluding Tarvisio flows, supply available to the Italian market — including domestic production, LNG and pipeline imports — was still about 15mn m³/d short of demand in 2022.
Diversification efforts
Italy will continue to put in efforts to diversify gas supply sources, as well as to reduce domestic consumption, Meloni says.
The government has announced plans to add 12GW of renewable capacity this year, which may curb power-sector gas use. But further increasing supply from southern routes may take much longer. The Tap operator is considering raising the pipeline's capacity to 20bn m³/yr, which could be completed by 2027.
State-controlled energy firm Eni has also signed a deal with Libya's state-owned NOC aimed at developing a major offshore gas project, which could boost supply to the domestic market, as well as exports to Italy, by 2026.
But Italy may be unable to absorb more supply from southern routes until Snam finishes its Adriatic pipeline project, which the firms expects to be completed in 2027. The project would increase south-to-north transport capacity by 10bn m³/yr to 150mn m³/d, from 126mn m³/d at present.
