(Montel) Italian efforts to cut its reliance on Russian gas are bearing fruit, but industry experts reckon the country cannot do without Russia, at least until 2024, to ensure security of supply.
Russia had accounted for 40% of Italy’s gas imports prior to the invasion of Ukraine in February, but it has now dropped to 15-20%, according to the Italian government. In the first seven months of the year, Italian gas imports from Russia fell 38% to 10.5bcm year on year.
Consequently, Algeria has become Italy’s largest gas supplier and is expected to increase its gas exports to Italy by up to 9bcm, reaching Transmed pipeline’s maximum available capacity of about 30bcm/year in the 2023-2024 winter season.
“When you go in the nitty-gritty of the logistics of the [Italian] gas market, you still have a constraint in terms of how much you can import from the south and bring to the north, so at the moment is unfeasible to [replace] completely Russia with Algeria,” said Matteo Mazzoni, Icis director of energy analysis.
“To secure supply through winter and keep the lights on you need Russia to keep exporting even at minimum capacity as is currently the case,” he said.
A complete halt of those flows would have serious consequences on the overall balance in Italy, especially if the coming winter should see below average temperatures, he said.
Apart from Russian gas giant Gazprom curbing gas flows to Europe, the EU agreed earlier this year to cut Russian gas imports by two-thirds within a year in response to the war along with a raft of sanctions. The bloc also introduced gas storage targets to ensure sufficient supplies ahead of winter.
“I don’t think Italy, or any other European country, is in a position where it can give up [gas] supplies from Russia in the short-term,” said Jacopo Casadei, gas analyst with Energy Aspects. “As long as there are some [Russian] deliveries I don’t think [Italy] will actively cut them down, at least not until 2024.”
For Casadei the big question for this winter lies on Algeria’s increased gas exports to Italy.
“When will the new promised capacity really materialise?” he said. “Do Algerians technically have enough engineering manpower and enough production to meet increased demand?”
Market observers fear Russia might not resume gas exports through the Nord Stream 1 pipeline to Germany following three days of maintenance starting today. It had been operating at just a fifth of capacity for weeks.
Storage on track to 90%
Analysts agreed Italy will reach its gas storage target of 90% of capacity by November, even without Russian gas. Italian gas storage facilities were last seen at nearly 82% of capacity, according to data from Gas Infrastructure Europe.
Nevertheless, an entire heating season without Russian gas, would make “the situation too tight not to worry… too many things could go wrong,” said Mazzoni.
Should hydropower production return to average levels, relieving some of the stress on gas-fired plants, and the nuclear energy output in France rebound, then “the situation would be dire, but not super critical,” he said.