Italy Plans to Diversify Energy Supply to Cut Reliance on Russia

(Bloomberg) -- Italy must diversify its sources of energy to curb dependence on Russia, Prime Minister Mario Draghi said as Europe prepares for potential supply shocks following President Vladimir Putin's invasion of Ukraine.

While there are currently no signs of an interruption to gas flows from Russia, Italy is working on a plan to mitigate any impact from such a scenario, Draghi said Tuesday. His government is among many across the region weighing the risk that sanctions could disrupt flows, or that Moscow could halt shipments in retaliation for penalties.

Italy is keen to boost gas imports from countries such as Azerbaijan and Algeria, the prime minister told lawmakers in Rome. In time, it also wants to double the capacity of the Trans Adriatic Pipeline in the Adriatic Sea, expand import capacity for liquefied natural gas and drive up the use of renewables.

Russia's attack on Ukraine -- a transit route for about a third of Europe's supplies of Russian gas -- has forced a rethink of national energy policies across the continent. The European Union is due to produce a strategy next week aimed at cutting reliance on Russia. Germany has already retooled its energy policy in the wake of the invasion.

Italy imports almost all its gas, with about 40% coming from Russia. With European prices for the fuel up 60% so far this year, the country is facing record inflation, worsening a cost-of-living crisis. Yet a significant shift in the nation's energy mix will take at least two years to bring about, Ecology Minister Roberto Cingolani has said.

Alternative Supply

To plug any immediate gas shortfall, the EU has been talking to exporters around the world to gauge their ability to send more supplies.

Azerbaijan, the Caspian Sea nation that started sending gas to Europe at the end of 2020, has said it will consider “good proposals,” but may only have “insignificant” amounts available to sell on the spot market as most volumes go to customers on long-term contracts signed years ago.

Algeria is ready to increase gas supplies to Italy, Foreign Minister Luigi Di Maio said after visiting the country with Eni SpA boss Claudio Descalzi. Spain also said that the Algerian government had given assurances that “if we or our European partners” need more gas, “they are willing to provide it.”

Yet, as in Azerbaijan, most gas shipments from the state energy company are tied to long-term agreements with buyers.