“The race to replace Russian gas supplies? A staging “. This is the severe comment of Salvatore Carollo, expert in energy trading, regarding the news of the gas supply agreement with Algeria that would lead to increasing volumes in the gas pipeline with landing in Mazara del Vallo until reaching nine billion cubic meters in 2024 of gas.
Thus a third of the volume of Russian imports would be covered …
There is a basic misunderstanding that no one intends to clear up. One of two. Or Russia unilaterally decides to interrupt the supply through the gas pipeline which, crossing Ukraine, reaches Tarvisio to connect to the national Snam network. In this case, in addition to putting Italy in serious difficulty, there would be a violation of contractual obligations which would justify the current mad rush to replace suppliers. In reality, in order to demonstrate that it is not using fuel as a pressure weapon, Russia has even increased the gas directed to Italy by 20%. After all, even after 7 weeks of conflict, the pipeline continues to function. Just as the Russians continue to pay the royalty passing through the same nation they bomb.
Or?
Or doing without Russian gas is a political choice. A government decision that forces the contracting companies, private entities such as Eni, Enel, Edison, to break contracts with the Russian supplier Gazprom. However, in the absence of an interruption of the flows by Gazprom, it would be impossible to assert a cause of force majeure in the arbitration. Companies would have to pay for supplies up to the contractual expiry, in addition to damages for breach of contractual agreements.
But even in the case of an embargo decided by the government, or imposed by Europe?
Yes, only if the veto comes from a supranational institution to which both sides adhere, the United Nations for example. The contract was signed between private energy companies and not between the Russian state and the Italian Republic.
How are gas supplies from Russia regulated?
They are Take or Pay contracts, basically you collect the fuel or you have to pay anyway if you want to stop earlier. These are types of contracts that are very common on the energy market. With a multi-year duration and a price fixed in advance, they guarantee the producer the recovery of investments and the construction of the pipeline.
When do Take or pay contracts with Gazprom expire?
There are several expiration ranges; indicatively 60% will arrive by 2028, and about another 20% will be in place until 2035.
So how do you interpret the government’s intense activity for the replacement plan then? The agreement with Algeria?
Tactics. Did you by any chance read a joint communiqué from the Government of Algiers and that of Rome? No. Algeria has simply received a historic partner, it has given its willingness to build long-term contracts relating to an articulated plan that includes gas but also hydrogen and renewables. Currently Algeria has saturated its production capacity; no additional volume without first making investments to develop new fields. The first additional gas flows will arrive in Italy, at best, in 2 or 3 years.
The missions in Africa, then, in Congo, Mozambique, Angola?
No short-term impact commercial action, and these are all complex situations with uncertain times. Congo has no certified proven reserves. At most, these are gas bubbles that require disproportionate investments of less than a billion cubic meters. The gas of Angola is that associated with the extraction of oil; it is of poor quality and in varying quantities. The liquefaction plant that treats Angolan gas belongs to a joint venture in which Eni owns 12%. Can the Italian government expect production to be diverted all here? In Mozambique, the situation is even more complicated. Eni has discovered a small field, has invested in a floating liquefaction plant and has already sold out all of its LNG production to the British group BP. It would be up to buy it back as long as the British group is available.
paying it dearly?
It is clear that we will pay for liquid gas at least 3 times more than Russian gas. With in addition the investments in infrastructures for its introduction into the network. Businesses and citizens will find even higher bills. Same story for the gas “offered” by President Biden. To sell the commodity US are private companies; Italian importing companies would find themselves in competition with other buyers from the Far East. Already now the price has doubled and so if you want to grab it you have to be ready to pay more than the Japanese operator.
Can we count on doubling the capacity of the much-fought TAP gas pipeline?
The Baku government has given availability, but it represents 20% of the joint venture that controls the pipeline, the other operators must be convinced. First, however, it is necessary to verify if there is availability of gas resources for the next 10-15 years to justify the investment in the infrastructure. This also takes several years.
Does the increase in national gas production remain?
With identified and certified fields, we can reach over 10 billion cubic meters in a couple of years. A Sblocca Italia type program should have been set up to open up the possibility of new authorizations for the extraction of gas in the national subsoil and level investments in the sector. Instead, with a self-defeating timing, after years of hibernation, in February, Pitasai, the plan that restricts mining areas, was approved.
In conclusion?
It is not clear what the Government intends to do with these facade agreements and courtesy visits. Perhaps he believes that the war will not go on for very long and, before next winter, it will return to the situation as before. Otherwise, if he wanted to get serious, Draghi would go, as pragmatic Germany did, to Qatar to negotiate with a large producer of liquid gas. What is certain is that we cannot afford to continue paying for Russian gas “together” with the alternative gas. The burden on bills and businesses would become tragic.
(Patrizia Feletig)
— — — —
We need your input to continue to provide you with quality and independent information.
SUPPORT US. DONATE NOW BY CLICKING HERE
© REPRODUCTION RESERVED
–
