Italy agrees with Algeria to increase its gas purchases in order to reduce its dependence on Russia | Economy

Italian Prime Minister Mario Draghi forged an agreement on Monday during his visit to Algiers that will allow Italy to reduce its energy dependence on Russia, a country from which it imports 40% of the gas it imports. she consumes. In brief statements to the press from Algiers, Draghi confirmed that the energy company Eni and the Algerian company Sonatrach have signed an alliance to increase gas exports to Italy, without however specifying how much or by when.

Draghi recalled that after Russia invaded Ukraine on March 24, he announced that Italy would act as quickly as possible to reduce its dependence on Russian gas. He added that Monday’s agreements are a response to this strategic objective. And he warned: “There will be more.”

The Maghreb country, Italy’s leading trading partner in Africa, is currently Rome’s second gas supplier – with 30% – behind Russia – which sells 40% – and the government’s idea is that it gradually becomes the first. Furthermore, Draghi explained that the two governments signed a declaration of intent on bilateral energy cooperation that goes beyond gas. “Italy is ready to work with Algeria to develop renewable energies and green hydrogen. We want to accelerate the energy transition and create development and employment opportunities,” he stressed.

I work for months in Rome

Mario Draghi did not specify in his brief appearance in front of the media if Algeria will increase the price of gas in the contracts it has to renew. In the case of Spain, the increase is certain. Spanish Vice-President for Ecological Transition, Teresa Ribera, had already specified on April 7 that Algeria intended to increase gas prices to Spain, and hoped that the increase would be “moderate”. Ribera said Algerian company Sonatrach had already warned in October that current prices were well below the rate at which gas is quoted on international markets.

The Italian president met President Abdelmayid Tebun twice during this one-day trip. For Italy, this meeting is transcendental, since it imports around 95% of the gas it consumes. The European Union, which buys 40% of its gas from Russia, has also undertaken to reduce its dependence on Moscow. But not all European countries have the task as easy as Italy, whose diplomacy had been working for months with Algeria, with the aim of making it its first supplier. The Head of State, Sergio Mattarella, and the Minister of Foreign Affairs, Luigi Di Maio, traveled to Algiers in November accompanied by Claudio Descalzi, the CEO of the Italian multinational energy company, Eni.

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This new visit by the Italian delegation to Algeria comes at a time of maximum tension between Algeria and Spain, after the reversal of Madrid’s foreign policy concerning Western Sahara and its recent support for the Moroccan autonomy plan for this region as the “more serious, realistic and credible” solution.

The Italian tube carries three times more gas than the Spanish

The gas that Italy receives directly through its gas pipeline known as Transmed is more than three times greater than the Algerian gas that arrived in Spain in 2020 through the Medgaz pipe, which connects to Almería: 22,000 million cubic meters of gas Italian compared to the 7 billion Spaniards.

Since Algiers cut the service of the Maghreb-Europe gas pipeline, which linked Algeria to Spain via Morocco, Spain has stopped receiving 6,000 million cubic meters directly. Currently, expansion works are underway in the Medgaz with which it is planned to increase its transport capacity to 10,000 million cubic meters. Spain receives the rest of what it needs in the form of liquefied gas, which is transported by LNG tankers, mainly from the United States. The price of the smoothie is usually much higher than that which goes through a tube.

The Italian gas pipeline is only operating at two-thirds of its total capacity, which reaches up to 30 billion cubic meters, so there is ample room to increase supply and no new infrastructure investment would be needed.

Alessandro Gili, a researcher specializing in infrastructure and geoeconomics at the Italian Institute for International Political Studies, explains to this newspaper that the flow of gas between Algeria and Italy could increase further this year, until its full capacity, with which Algeria would become Italy’s first. largest supplier of natural gas, surpassing Russia.

Travel to other countries

For his part, Davide Tentori, an analyst specializing in geoeconomics within the same institute, estimates that it will take time for supplies from Algeria to increase. “And in the meantime, let’s hope the supplies from Russia don’t dwindle,” he says. “The countries of the European Union are advancing in dispersed order, with individual diplomatic initiatives. Apart from Italy, the main recipient of Algerian gas is Spain. Perhaps it would be better to discuss in a concerted way how to diversify oil and gas supplies,” he added.

The Italian government has also sent delegations to other countries such as Azerbaijan, from where it received 7.2 billion cubic meters last year via a pipeline that crosses the Adriatic Sea, or Qatar, from where it imported some 6.8 billion cubic meters. Since the beginning of the invasion of Ukraine, the Italian Foreign Minister has also visited the Democratic Republic of Congo, Angola and Mozambique and assured that “all these countries have been available to increase the supply ” in gas from Rome, although “there is still much to negotiate.”

Researcher Alessandro Gili explains that the trips made by Italian delegations in recent months to Congo, Angola, Qatar and Mozambique have been important, in particular to increase the flows of liquefied natural gas (LNG), which in 2021 represented around 13 % of national gas demand. Gili is in favor of increasing the number of three regasification plants that already exist in Italy, compared to six in Spain, which is the country with the most plants in Europe. The researcher believes that it is also in Italy’s interest to have floating gasification vessels, which could supply an additional 5 billion cubic meters of liquefied gas to Italy per vessel.

Rome’s strategy is to buy from other countries at least half of the 29,000 million cubic meters of gas that was bought from Russia last year. The government’s idea is to achieve this objective by 2023, because in the short term it is impossible to think of going without gas.

The government plan also provides for an increase in the amount of gas that is stored in the summer – when it is used less by not turning on the heating systems – to prepare for winter. This part of the energy strategy is also shared by the European Commission, which wants to introduce a rule obliging member countries to fill storage spaces (in Italy there are 13) to at least 90% of their capacity before October of each year.

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