Italy wants to demote Russia and make Algeria its top gas supplier – POLITICO

Algeria is poised to overtake Russia as Italy’s biggest gas supplier thanks to a deal struck by Italian Prime Minister Mario Draghi on Monday, while Rome scrambles to replace Russian gas.

Russia supplies about 40 percent of Italy’s natural gas, but that dependency is now seen as a threat following Russia’s invasion of Ukraine. Though Draghi is strongly committed to Italy’s role as a close US ally in NATO, Rome’s long-standing reliance on Russia for hydrocarbons has tied Italy’s hands when it comes to economic countermeasures against President Vladimir Putin.

“Right after the invasion, I announced that Italy would act quickly to reduce dependence on Russian gas. This agreement is a significant response to this strategic goal. There will be others,” Draghi said after meeting Algerian President Abdelmadjid Tebboune.

Under the act between Algeria’s Sonatrach and Italy’s Eni, Algeria will send another 9 billion cubic meters of gas to Italy by next year and in 2024.

In 2021, Italy imported approximately 29 billion cubic meters of gas from Russia and 22.5 billion cubic meters from Algeria. according to to the Italian Ministry of Economic Development. If the deal is upheld, Algeria would replace Russia as Italy’s main gas source by next year.

Italy’s Foreign Minister Luigi Di Maio and Eni boss Claudio Descalzi have launched a diplomatic charm offensive and visited gas producers Azerbaijan, Mozambique, the Republic of Congo, Qatar, Angola and Algeria.

“Unfortunately we are late, we should have diversified much earlier, but we have many partners and friends around the world,” said Di Maio called before the visit on Monday.

Visits by Draghi to Mozambique, Angola and Congo over the next few weeks are under discussion, according to an official.

Further investment required

Algeria needs cash to ramp up its gas production because it hasn’t invested much in new production over the past three decades while domestic consumption has skyrocketed, said Davide Tabarelli, an energy analyst for Italian consultancy Nomisma. The Transmed pipeline between Algeria and Italy is not running at full capacity because Algeria does not have the extra gas to fill it.

Alessandro Lanza, professor of energy policy at Luiss University in Rome, said Algeria will need new investments in infrastructure to increase production as it cannot divert gas it is currently sending to Spain. “Natural gas isn’t just a faucet that you can open.” He estimated it would take 12 to 18 months to ramp up production.

Last month Eni and Sonatrach announced that they have found a “significant” oil and gas field in the Algerian desert that they will jointly exploit.

While Italy strengthens ties with Algeria, ties with Spain, the other main buyer of Algerian gas, are on hold.

Spain angered Algeria by backing a Moroccan attempt to grant limited autonomy to Western Sahara, a former Spanish colony. Morocco annexed the territory in 1975, while Algeria supports Western Sahara’s independence.

Algeria last year switch off a gas pipeline running through Morocco to Spain, although it insists supplies to the Iberian Peninsula continue through the remaining Medgaz subsea pipeline.

Algeria cannot redirect its gas obligations from Spain to Italy, although Madrid can voluntarily give up part of its stake and replace it with liquefied natural gas, Tabarelli said.

If it has to, Italy could replace much of the Russian gas it buys by boosting gas imports from Africa and increasing LNG capacity, Lanza said, although doing so will come at a cost. “In two years, Italy could have reduced its reliance on Russian gas from 40 percent to a safe 20 percent.” Italy wants to demote Russia and make Algeria its top gas supplier - POLITICO

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