EAGC: Edison official stresses European gas diversity

Enhancing diversity of gas supplies is a key challenge for Europe, and the Caspian could become an important source, according to an Edison SPA senior official at EAGC at Lake Como, Italy.

Nov 25th, 2008

Uchenna Izundu
International Editor

LAKE COMO, ITALY, Nov. 25 -- Enhancing diversity of gas supplies is a key challenge for Europe, and the Caspian could become an important source, according to an Edison SPA senior official at the European Autumn Gas Conference (EAGC) at Lake Como, Italy.

Riccardo Pasetto, executive vice-president of corporate business development at Edison, said: "We want to promote new gas from the Caspian; the advantage of our position is small compared with [that of] Nabucco."

Edison's proposal is the IGI (Interconnect Greece-Italy) gas pipeline that would import 8-10 billion cu m/year of gas from the Caspian and the Middle East areas through Turkey to connect Italy and Greece. Deliveries are expected to start in 2012. Edison is working with the Greek company Depa to build the 800-km long pipeline.

OMV AG is developing the 3,300-km Nabucco gas pipeline, which is of strategic importance for the European Union. It has a planned capacity of 31 billion cu m/year of gas to be delivered from the Caspian and Central Asia beginning in 2013.

Energy security sought
Currently Russia is one of the biggest suppliers of natural gas to Europe, but this reliance troubles European politicians and policy makers as Russia increasingly uses energy to shape its foreign policy.

In 2007, Russia provided 27% of Italy's required 13.5 billion cu m of gas, followed by Libya 11% and Norway 10%, according to Pasetto. However the IGI pipeline in 2015 will supply 27% of the 24 billion cu m required, with Qatar providing 26%, Algeria 17%, Libya 17%, and Russia 17%.

"Russia and North Africa will remain the main suppliers to Europe, providing 35% of total demand," Pasetto said. "Russia's…incremental supplies of 30-60 billion cu m should be lower than the additional capacity provided by the projects under development."

Pasetto stressed that LNG supplies will be essential to meeting future European gas demand, but this could be subject to arbitrages on the US and Asian markets. If gas prices are attractive in Italy, the LNG will come. Qatar's role will be crucial, and Edison is developing the 8 billion cu m/year North Adriatic LNG regasification terminal in partnership with ExxonMobil Corp. and Qatar Petroleum.

RasGas II has agreed to supply 6.4 billion cu m/year for 25 years. The remaining 20% of Adriatic's capacity will be available to third parties. It was meant to be ready a year ago, but the companies had difficulty developing the terminal's gravity-based structure, which is a type of artificial island. This, "the world's first," was installed in September (OGJ Online, Sept. 23). The terminal is expected to become operational next year.

Gas storage is another major priority for Edison to optimize on logistical flexibility, and the company is developing 1.6 billion cu m of working gas storage capacity by 2013-14. Gas storage would provide regular returns, and the authorities are still considering exempting Edison from offering access to third parties under European Union's rules. The project will cost €550 million, of which €230 million is for the facilities and €320 million is for the cushion gas. In 2006-07, Edison provided 0.2 billion cu m of total gas capacity, but it expects this to rise to 2.2. billion cu m by 2013-14.

Pasetto emphasized that the company "was increasing its natural gas position in the liquid gas markets of northern Europe in order to become an important European player." This would be through portfolio optimization; asset based trading, and sales to Central Europe.

Edison also plans to increase its share of equity gas in its portfolio by 15% by concentrating on exploration and acquisition opportunities, Pasetto added.

Contact Uchenna Izundu at uchennai@pennwell.com.

More in General Interest