Overview

Italy is heavily reliant on gas imports, producing only around 11% of the gas it consumes. The country has a substantial gas supply, but little diversity or liquidity. While Italy receives strong flows from the likes of Russia, Algeria, Libya and Norway, it is also heavily dependent on those countries for the majority of its gas.

Several pipeline shutdowns over the past few years have highlighted the country’s precarious position. The closure of the Libyan GreenStream pipeline in 2011 and various prolonged disruptions on the Swiss Transitgas interconnector startled the market and led to price spikes.

However, as in many other European nations, demand for gas in Italy has fallen sharply in recent years. BP statistics show Italy consumed 64.2 billion cubic metres in 2013, down by just under 19% since it peaked at 79.1 bcm in 2005. This drop in gas demand has been driven in part by a move towards renewables, which provided 8% of Italy’s total primary energy consumption in 2013. Falling overall energy demand has also reduced the need for gas.

Italy’s LNG receiving terminals have therefore been somewhat quiet. While Adriatic LNG received 5.4 bcm in 2013, deliveries at Panigaglia have fallen to such an extent that the country received its first cargo for more than a year in February 2014.

Meanwhile, The OLT Livorno terminal, which started up in December 2013, has received no cargoes so far. The terminal will remain a stranded asset until Italian gas demand recovers.

The lack of demand for gas in Italy has left the country oversupplied and low prices mean companies are making a loss on LNG imports and therefore seeking to minimise them.

Italy’s previous government, led by former Prime Minister Mario Monti, lifted restrictions on developing new gas production because it was concerned about the over-reliance on certain countries for supply security.

Monti’s government enforced the break-up of market dominance by Eni in the hope of introducing greater competition. Eni was forced to sell off its controlling share in Snam Rete Gas, which owns the Italian gas transport network and storage facilities, to make it easier for companies to enter the market.

Italy’s new Prime Minister Matteo Renzi, appointed in February 2014, has already taken steps to shake things up further at Eni by replacing Chief Executive Paolo Scaroni with Claudio Descalzi, the company’s former head of upstream.

Page updated: 07/08/2014