UPDATE 1-Eni must sell some gas storage-watchdog

* Eni must sell some storage sites

* Antitrust says Eni management damages competition

* Italy gas use vulnerable under current system

ROME, June 3 (Reuters) - Italy's oil and gas giant Eni (ENI.MI) must sell some of its gas storage sites to other players, Italy's antitrust authority and energy watchdog AEEG said on Wednesday, as its management damages competition.

The authorities said Eni, which controls 97 percent of stocks through its Stogit unit, had so far made "absolutely marginal" improvements to guarantee more security to the system and to increase competition.

They said their investigation found the country was vulnerable under the current system to extraordinary events such as very cold snaps or the recent row between Russia and Ukraine which cut Russian gas supplies.

Eni had no comment on the decision.

Italy consumes over 85,000 million cubic metres (mcm) of gas per year and relies heavily on imports for its gas supplies, with about 60 percent of its power generation fleet based on gas.

Eni, the former state monopoly, controls gas transmission grid operator Snam Rete Gas (SRG.MI) in addition to Stogit.

The system needs "a significant reinforcement of storage capacity ... (which is) essential for improving security levels," the authorities said in the statement.

The authorities said sale of storage assets would enable new players to enter the market and mean new capacity would be developed.

Snam has agreed to buy Stogit and gas distribution unit Italgas from Eni in a 4.7 billion euro deal and has promised to invest 2 billion euros in the units.

(Reporting by Alberto Sisto and Gilles Castonguay, writing by Jo Winterbottom; editing by Elaine Hardcastle)