(Repeats Tuesday story, adds link to map, no change to text)
* Russia meets almost half of Italy's gas demand
* Italy boosted dependency on Russia, snubbed Algeria
* Escalating violence in Libya also threatens supplies
* LNG import options few and costly
By Stephen Jewkes and Oleg Vukmanovic
MILAN, Aug 26 Italy will struggle to stay warm
this winter if Russia's conflict with Ukraine disrupts gas
supplies and Libya veers towards collapse, putting at risk an
already shaky economic recovery following years of recession and
Caught between dwindling gas imports from North Africa and a
rising dependency on Russia, Italy's contingency plans for a
complete breakdown in Ukrainian transit flows consist of raiding
stockpiles, arranging costly emergency shipments, as well as
forcing heavy industry to cut its output.
Import-reliant Italy uses gas to fuel almost half its power
plants, triggering fears the conflict between Russia and Ukraine
as well as tit-for-tat sanctions between the West and Moscow
could disrupt deliveries by Gazprom to Europe.
"It's a problem. In the short term, Italy has no alternative
to Russian gas," said Leonardo Maugeri, ex-strategy head at
Italian major Eni and now at Harvard Kennedy School.
Italy's winter gas prices are trading 2.6 euros ($3.43) per
megawatt hour above rival benchmarks in northwest Europe,
underscoring the view that its energy supplies are most
vulnerable to Russian gas cuts and cold snaps.
In 2006 and 2009, price disputes between Russia and Ukraine,
which pumps half of Moscow's gas supply for Europe, triggered
widespread disruptions and prompted Italy to rush through
emergency measures that included tapping strategic gas reserves.
Although things are different this year due to a mild spring
and summer and low demand in crisis-hit Europe, just a month of
freezing weather with key gas supplies down could see supply
shortfalls in Italy, and former Eni CEO Paolo Scaroni has warned
a halt to Russian gas flows would raise prices and could cause
North Africa also poses threats. Although oil and gas output
in Libya has risen recently, Italian importers worry that its
exports might collapse as violence escalates.
Risks this year are particularly high after price cuts led
Italy to boost Russian imports to 49 percent of supply in the
first half, up from 41 percent in 2013 and 32 percent in 2012.
At the same time, the glut of Russian gas has led Italian buyers
to snub alternative supply deals, reducing its options.
Edison has suspended its contract with Algeria's
state-run gas monopoly Sonatrach, Enel has sold some
of its liquefied natural gas (LNG) tanker cargoes from Nigeria
to Britain's BG Group, while Eni has halved imports from
Algeria and could incur extra charges if it requested more gas.
Should gas be rationed, energy-intensive steel and chemicals
industry would be first to feel the pain as household supplies
ALGERIA IS KEY
With Russian and Libyan imports at risk, Algeria has become
key in safeguarding supplies.
"If the agreement between Sonatrach and Eni enables Algerian
gas to come back to Italy then even a prolonged disruption from
Russia shouldn't have much effect, but without Algerian supply
it could make things tight," Wood Mackenzie energy analyst
Massimo Di-Odoardo said.
Algeria used to be Italy's biggest gas supplier, but booming
internal demand, flagging production, and attractive Asian LNG
markets led to a 40 percent drop in flows to Italy last year.
Yet analysts say Italy could increase Algerian imports
relatively easily, albeit at a higher price.
"Volumes with Algeria can probably be raised but I doubt it
could be done without having to pay a price," Harvard Kennedy
School's Maugeri said.
Other counter measures to avoid a supply crisis include gas
tanker imports, using up gas stocks, as well as shifting towards
burning more oil and coal.
Italian storage sites are expected to reach record fullness
by October based on current refill rates, already surpassing the
10 billion cubic metre (bcm) mark following a mild 2013/2014
winter, Reuters data shows.
Italy's 16 bcm of storage capacity is Europe's biggest along
with that in Germany and France.
Based on Russian gas imports last January, a full cut off in
gas transiting Ukraine would leave Italy facing a shortfall of
100 million cubic metres/day (mcm) of which Russia could
re-route 35 mcm through the Nord Stream and Opal pipes to
Analysts say Italy could also shift towards using more oil
and coal-fired power stations in order to plug gas shortfalls.
Idle terminals to import LNG tankers may also help, but
overseas LNG imports take time to be shipped to Europe and they
will be costly as Italy would have to compete with other buyers
in Europe as well as Asia, where prices tend to be much higher.
"We need to make preparations for contingencies ahead of
time. We have three LNG terminals that are hardly being used but
delay would make picking up shipments very difficult," said
Paolo Ghislandi of gas trader and supplier association AIGET.
(1 US dollar = 0.7579 euro)
(Editing by Henning Gloystein and David Evans)