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Analysis - Algeria bigger threat to Italy gas flows than Libya

MILAN (Reuters) - Escalation of unrest in major gas producers Algeria and Tunisia would pose a far bigger threat to supplies into Italy and Europe than the current disruption caused by violent turmoil in Libya, analysts said on Thursday.

Italy, which imported almost 70 billion cubic metres (bcm) of gas in 2009, received over 21 bcm of gas from Algeria, via Tunisia, nearly three times what it used to get from Libya. In 2010 Algerian imports rose to 25-26 bcm.

The Libyan gas disruption is far less serious than the Russian-Ukraine gas crisis in the frigid winter of 2006 which set alarm bells ringing across Europe and forced Italy to tap strategic reserves.

“Libya is not a major problem because you can source gas from elsewhere. But if Algeria goes down we’re in a different ballgame. It would be a real problem for next winter given that we replenish our gas stocks in the summer,” said Paolo Ghislandi, secretary general of Italian association of energy traders and suppliers AIGET.

Unrest has spiralled across north Africa and the Middle East since late last year, toppling the presidents of Tunisia and Egypt this year, sending many thousands of people onto the streets demanding political and economic change.

On Tuesday Algeria’s cabinet adopted an order to lift a 19-year-old state of emergency in a concession designed to dodge the tide of uprisings sweeping the Arab world, but protesters said it was not enough.

Gas transmitter Snam Rete Gas SRG.MI, the biggest regulated gas business in continental Europe, has said Italy's strong pipeline links to north Africa and Russia as well as ample storage capacity make it a good candidate for becoming a Mediterranean gas hub for Europe.

Russia is Italy’s second-biggest gas supplier with imports in 2010 totalling 22-23 bcm.


Analysts say now is not the worst time for a disruption crisis given that Italian consumption is still depressed after the economic crisis, there is a lot of spare capacity and the winter season is ending.

“The Russian pipeline (TAG) is only 60 percent used and anyway stocks would see us through to the summer. But there would be a big impact on prices and a looming problem for next winter,” said Stefano Casertano, senior fellow at German think-tank

Italy, which has no nuclear power and just two liquefied natural gas (LNG) plants, is dependent on gas imports to help fuel its power stations which are around 50 percent gas fired.

Italy has 9 bcm of working gas storage capacity, over 95 percent controlled by Snam. There are also 5.1 bcm of strategic reserves which can only be tapped after government approval.

Snam is over 50 percent owned by oil and gas giant Eni ENI.MI which controls key import pipelines carrying gas from Russia, North Europe, Libya and Algeria. Eni said earlier on Thursday its oil and gas output from Libya had more than halved to 120,000 barrels of oil equivalent a day.

“If anything happens in Algeria there will be big moral suasion to build more LNG plants which lower security of supply risk,” AIGET’s Ghislandi said.

Editing by Keiron Henderson