This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/15/2019

Overview
Italy is an attractive market for natural gas as the third largest in Europe per consumption, after Germany and the UK, and the second largest importer in Europe, behind Germany.  Natural gas accounts for about 35% of Italy’s primary energy consumption (2016) and over 47% of gross electricity production (2017).
The following table presents the evolution of gas demand in Italy for the last three whole years for which data is available: the increase of the usage of natural gas for power generation is noteworthy.
Italy’s Gas Demand – in bcm

Sector201520162017% change 2017 vs 2015
Residential and commercial  28.9728.8629.491.8%
Power generation  20.6223.4325.3623.0%
Industry  14.0114.5415.7412.3%
Other (*)  1.972.052.064.6%
Consumption and losses  1.962.032.527.6%
Total demand  67.5270.9175.1511.3%
Note: (*) Including consumption for Agriculture and Fishing, Chemical synthesis, automotive and bunkering
Source: Snam Rete Gas

Imports represented 92% of total supply and have been growing due to a reduction in domestic production. Natural gas in Italy is mainly imported from Russia (39%), Algeria (29%), Libya, The Netherlands, and Qatar.
The below tables show Snam’s (the Italian gas grid owner and operator) annual demand and supply forecasts for natural gas and biomethane:

Natural Gas and Biomethane Demand Forecast in Italy - Bcm
Sector20172022202720302035Annual Average % Change
Residential and commercial  29.527.826.224.922.4-1.5%
Power generation  25.422.924.821.321.2-1.0%
Industry  15.716.41615.614.9-0.3%
Other (*)  2.12.44.76.98.17.9%
Consumption and losses  2.52.42.52.42.3-0.5%
Total demand  75.271.974.370.968.9-0.5%
Note: (*) Including consumptions for Agriculture and Fishing, Chemical synthesis, automotive and bunkering
Source: Snam Rete Gas

Natural Gas and Biomethane Supply Forecast in Italy – Bcm
Sector20172022202720302035Annual average % Change
Imports69.367.573.569.968.3-0.10%
National production5.26.475.856.085.770.50%
Exports-0.3-2.11-5.11-5.11-5.1116.50%
Total supply74.371.974.370.968.9- 0.4%
Source: Snam Rete Gas
The scenarios outlined above take into consideration the gradual, planned decarbonization of the Italian economy but also an increase in the local production of biomethane, peaking at about 2.5 bcm by 2035, for use as a biofuel.   

Leading Sources of Import
Up until now Italy has been heavily dependent on Russia and Northern Africa for its gas supplies.  Concerns regarding Russian supplies are related to political tension between Russia and Ukraine, through which most Russian gas deliveries to Italy are transiting.  

In the future, there will be a reduction in the quantity of gas supplied from Northern African imports. For instance, Italian utilities ENI, Enel and Edison all hold commercial gas supply contracts with Algeria (Sonatrach) that expire in 2019.  ENI in late May 2019 renewed its agreement with Sonatrach but for a shorter duration: 10 years vs. the customary 25 years and for half the amount of gas as was customary in the past. Commercial gas transit contracts with Tunisia will also expire in 2019. Also, deliveries from Libya are directly linked to the current political instability of that country.     

New sources of natural gas supplies to Italy could be Gazprom’s TurkStream project, which currently seems to be driven more towards the Balkans rather than Italy, and the Southern Gas Corridor project which lands in Italy via the Trans-Adriatic Pipeline (TAP), set to be opened in 2020, although supply from TAP will in any case be somewhat limited.

Recent offshore finds in the Eastern Mediterranean (Egypt, Cyprus) might provide supplies in the long term (e.g. the EastMed project, although at the moment Italy’s commitment to it, as well as the financial viability of the whole project, are unclear). 
The exploration and drilling of potential offshore and on shore resources in Italy remains a controversial topic and is encountering opposition from local governments and in some cases even at the central government level.

Because of all the above, a more secure way in which Italy is diversifying its natural gas supply in the medium term is by developing an LNG (Liquefied Natural Gas) infrastructure. Italy now has a total import capacity of 15 bcm/year of LNG supply and 17.5 bcm of natural gas storage capacity, including strategic storage.

Opportunities
There are currently three LNG terminals in activity in Italy.  Given Italy’s increasing interest in LNG as a secure way to diversify its natural gas supply and the USA’s rapid development of an LNG export infrastructure, all three terminals in the future could be recipients of LNG supplies from the USA.  Because of their increasing activity and expansion plans, the terminals could also present opportunities for U.S. exports of equipment and services needed for terminal operations.  Here is a brief description of each terminal:
 
The Panigaglia terminal, owned by SNAM, was the first LNG regasification facility built in Italy.  It is located near La Spezia, in Northern Italy, occupies an area of 45,000 square meters and consists of two holding tanks of 50,000 cubic meters each, steam plants and a dock for LNG carriers.  It currently has a regasification capacity of 3.5 billion cubic meters of gas per year and represents a complementary gas entry point to the import pipelines.  It is a land terminal and currently can only accommodate small LNG carriers.   In addition, Panigaglia’s location close to key tourist sites, homes, and population centers highlight the terminal’s security risk.  Both Livorno and Adriatic LNG (see below) can handle a much larger percentage (and sizes) of LNG carriers.  However, Panigaglia is increasing its activity:  in the past five years it had received an average of 10 ships per year but in the first three months of 2019 alone it has already received 11, with about 20 more scheduled to arrive before the end of the year.
The Adriatic LNG Terminal is located offshore of Porto Levante, in the northern Adriatic Sea, about 15 kilometers off the Veneto coastline (not far from Venice), where it is set on the sea floor.  It is the first offshore Gravity Based Structure (GBS) for unloading, storing and regasifying Liquefied Natural Gas (LNG), in full respect of the environment.  Adriatic LNG is a joint venture established in 2005.  It is 71% owned by Exxon-Mobil, with the remainder owned by the Qatar State Petroleum Company and SNAM.  With a regasification capacity of 8 billion cubic meters of LNG per year (equal to half the national LNG import capacity), the terminal has the potential to supply over 10% of national consumption of natural gas and in fact in 2018 it delivered 6.5bcm of natural gas to the national grid, topping all other European terminals by utilization rate (81%).    LNG to the terminal is shipped mainly from Qatar, but also from Egypt, Trinidad and Tobago, Equatorial Guinea, Norway and other countries.

The OLT Offshore LNG Toscana terminal is located about 22 km off the Italian coast between Livorno and Pisa.  It is permanently anchored to the seabed through an advanced mooring system.  It is controlled   by the Italian multiutility IREN, which owns 49% of its capital, and Australian fund First State Investments (that obtained 48% of OLT from German energy company. Uniper).  It has a regasification capacity of 3.75 bcm/year

Further to the three above terminals, the Italian Ministry of Economic Development (MISE) had authorized the construction of three more LNG terminals (Falconara Marittima, Gioia Tauro and Porto Empedocle) but very little is known about concrete plans to build them in the near future. 

Italian utility Edison has ambitious plans to set up the first logistics chain of small-scale LNG plants for naval and truck transportation applications only, through a network of coastal deposits and dedicated ships.  The first  deposit to start operations will be in Ravenna, with an expected start date of 2021 and a stocking capacity of 20,000 cubic meters.  Besides Edison’s, MISE has also been authorizing other small-scale coastal LNG stocking facilities for companies Higas, IVI Petrolifera and Is Gas Energit Multi-Utilities.  

U.S. firm Baker Hughes is increasingly constructing LNG plants and components at its locations in Italy, where it is active mostly through the Nuovo Pignone company, and exporting them all over the world.

Web Resources
SNAM website:  http://www.snam.it/en/index.html
Link to the Panigaglia page on SNAM’s website: http://www.snam.it/en/about-us/company-structure/gnl-italia/index.html
Adriatic LNG website: https://www.adriaticlng.it/en/home/
OLT website: https://www.oltoffshore.it/en/
Edison website:   https://www.edison.it/en
Baker Hughes website:  https://www.bhge.com/
U.S. Commercial Service Contact:
Federico Bevini, Commercial Specialist
U.S. Commercial Service, U.S. Consulate Milan
Tel: +39 026268 8520
E-mail: federico.bevini@trade.gov
http://www.export.gov/italy/

 

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