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

The Italian Prime Minister, Mario Draghi, forged this Monday during his visit to Algiers an agreement that will allow Italy to reduce its energy dependence on Russia, a country from which it imports 40% of the gas it 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, although he did not specify how much or in what time frame.

Draghi recalled that, after Russia invaded Ukraine on March 24, he announced that Italy would move as quickly as possible to reduce dependence on Russian gas. He added that Monday’s agreements are a response to that 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 it 40%– and the Government’s idea is that it gradually become in the first. In addition, Draghi explained that both governments have signed a declaration of intent on bilateral cooperation in the field of energy 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 opportunities for development and employment”, he pointed out.

I work for months in Rome

Mario Draghi has not clarified in his brief appearance before the media if Algeria will raise the price of gas in the contracts that it must renew. In the case of Spain, the increase is certain. The Spanish vice president for the Ecological Transition, Teresa Ribera, already clarified on April 7 that Algeria intends to raise gas prices to Spain, and hoped that said increase would be “moderate”. Ribera said that the Algerian company Sonatrach already warned in October that current prices are well below the rate at which gas is quoted on international markets.

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

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This new visit of the Italian delegation to Algeria takes place at a time of maximum tension between Algeria and Spain, after the shift in Madrid’s foreign policy regarding Western Sahara and its recent support for Morocco’s autonomy plan for that region as the solution “more serious, realistic and credible”.

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 higher than the Algerian gas that arrived in Spain in 2020 through the Medgaz pipe, which connects with Almería: 22,000 million cubic meters of Italian gas compared to to the 7,000 million Spanish.

Since Algiers cut off the service of the Maghreb-Europe gas pipeline, which connected Algeria with Spain through Morocco, Spain stopped receiving 6,000 million cubic meters directly. Currently, expansion works are being carried out in the Medgaz with which it is intended 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 so-called methane tankers, mostly from the United States. The price of smoothie is usually much higher than what comes through a tube.

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

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

Trips to other countries

For his part, Davide Tentori, an analyst specializing in geoeconomics at the same Institute, believes that it will take time for supplies from Algeria to be increased. “And in the meantime, let’s hope that supplies from Russia don’t decrease,” he says. “The countries of the European Union are moving in a scattered order, with individual diplomatic initiatives. Apart from Italy, the main recipient of Algerian gas is Spain. Perhaps it would be better to have a concerted discussion on how to diversify oil and gas supplies”, he values.

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

The researcher Alessandro Gili explains that the trips made by Italian delegations in recent months to the 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 the national gas demand. Gili is in favor of increasing the number of three regasification plants that already exist in Italy, compared to the 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 provide an additional 5 billion cubic meters of liquefied gas to Italy per ship.

Rome’s strategy is to buy from other countries at least half of the 29,000 million cubic meters of gas that were bought from Russia last year. The Government’s idea is to achieve this objective as of 2023, since in the short term it is unfeasible to think about dispensing with gas.

The government plan also provides for an increase in the amount of gas that is stored in 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 that obliges member countries to fill storage spaces (in Italy there are 13) to at least 90% of their capacity before October of each year .