Construction of Liquefied Natural Gas Infrastructure Develops Rapidly in Italy

Researched by Industrial Info Resources (Sugar Land, Texas)--Italy imported 85% of its primary energy in 2006, spending $75.3 billion, or 3.3% of its gross national product. Gas consumption in 2006 reached 84.5 billion cubic meters, composed of 10.4 billion cubic meters from national production, 77.6 billion cubic meters from imports, and 3.6 billion cubic meters from storage. The major foreign suppliers of gas to Italy are Algeria and Russia.

Italy currently has only one plant to store and regasify liquefied natural gas (LNG), located in Panigaglia and owned by ENI S.p.A. (NYSE:E) (Rome). Currently, 10 LNG projects are under development, but only one of these, located in Rovigo in northeastern Italy, will be completed by the end of this year.

Most natural gas imports enter Italy through international pipelines. The 670-mile Trans-Mediterranean Pipeline runs from the Hassi R'Mel gasfield in Algeria to Sicily via Tunisia. The Trans-European Pipeline and Transitgas Pipeline bring natural gas from northern Europe. Italy imports natural gas from Russia, via the Trans Austria Pipeline and from Libya via the Green Stream Pipeline, which links Libya to Sicily. Additional pipeline projects to Italy from Algeria, Greece and Russia are under development.

The trasport of LNG is an environmentally sensitive business, involving time-consuming and expensive negotiations in order to obtain necessary authorizations from varoius government offices and agencies.

Italian demand for natural gas has increased rapidly since 2000. This is due to three main reasons: construction of several gas-fired power plants, progressive depletion of national reserves, and completion of country gasification.

Problems are also occuring on the supply side. With the breakup of ENI S.p.A.'s monopoly of natural gas sales in Italy, various companies have moved into the market. In order to break ENI's hold on the importation of natural gas, Italy created room for new operators to freely import gas from producing countries and sell it to wholesalers, retailers or final customers. All international pipelines bringing gas to Italian market are owned by ENI, or ENI holds usage rights to them. ENI refused access to third parties' use of its international pipelines, stating that they were already operating at full-capacity; new companies were forced to buy gas from ENI before it crossed Italian border, lining ENI's pockets and doing little to break up the ENI's control of the gas market. Italy has subsequently made natural gas infrastructure easy to build by providing incentives and relaxing regulations. As a result, the construction of 12 new LNG terminals and three new international pipelines have been proposed.

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