Oil Report

Greece-Italy pipeline to ease Russia gas reliance

ATHENS, Jan 31 (Reuters) - Greece and Italy on Wednesday signed an agreement for the construction of an underwater natural gas pipeline which will help ease Europe’s over-dependance on Russian gas. Greece has been eager to sign the deal, seeking to become an energy hub linking central Asia to Europe, while Italy wants to diversify its energy supply and ease reliance on Russia.

Pierluigi Bersani, Italy's Minister of Economic Development, and Greek Development Minister Dimitris Sioufas, signed the agreement which grants exclusive usage rights to Italy's Edison EDN.MI and Greece's natural gas company DEPA.

The Greece-Italy pipeline will be connected to Turkey’s pipeline network, enabling Italy and the rest of the European Union to import 8 billion cubic meters of natural gas a year from the Caspian Sea basin and the Middle East.

“We have done something that in the future will lead us to more security as far as energy is concerned,” said Bersani. “This means diversification in supply and allows us to feed the market with larger quantities and be more flexible in pricing.”

To make the construction of the pipeline economically viable, the two companies will have the right to use its capacity for 25 years.

Under the agreement, 80 percent of the 8 billion cubic meters transmission capacity will be reserved for Edison and DEPA will have 20 percent.

If capacity increases beyond the 8 billion mark, up to 10 percent will be allowed to be sold to third parties.

Edison and DEPA have already started talks with gas-producing countries in the region, while the pipeline may even be expanded in the future to include sources from north Africa, Sioufas said.

“This pipeline offers prospects for building a connecting network to Albania and the former Yugoslav Republic of Macedonia,” Sioufas said. “For Greece its also important because we can provide gas to the centre and north of the country.”

The pipeline will be about 800 kilometers long, 600 kilometers of which will be built by DEPA in Greece, with the remaining 200 kilometers running under the Ionian sea between Greece and Italy.

Construction of the pipeline from the Greek town of Igoumenitsa to Italy’s Apulia is set to begin in July 2008 and is scheduled to be completed in 2011.

Pipeline construction linking Greece and Turkey is well under way and expected to be finished by the second half of 2007.