Italy's foreign minister will visit Algeria with its energy CEO to discuss cooperation in light of the Ukraine crisis, the ministry said Monday. The move comes as Western governments step up efforts to tap alternative gas supplies to reduce their dependence on Russia following its invasion of Ukraine.
Natural gas is considered the cleanest fossil fuel but doesn’t serve as a substitute for renewable energy sources such as wind and solar as it still emits a large amount of methane. The Foreign Ministry announced that Minister Luigi Di Maio was traveling to Algeria with Eni CEO Claudio Descalzi and a representative of the Ministry of Energy Transition.
Eni has a number of long-term gas contracts with Algerian gas monopoly Sonatrach and is one of the country's largest foreign energy producers. It also has strategic take-or-pay gas contracts with Russia's Gazprom.
How Much Gas Does Italy Import from Russia?
Italy, which generates about 40 percent of its electricity from gas, imports more than 90 percent of its total gas consumption, with most of it coming from Russia and Algeria.
Rome, which has introduced measures to boost domestic gas production and storage, is seeking to diversify its gas supplies to reduce its dependence on Russia. Given that global gas supplies are tight and liquefied natural gas (LNG) producers are already producing as much as they can, there is little available to offset Russia's large volumes.
Algeria, which has pipelines to Spain and Italy, boosted oil and gas production last year by 5%. Algeria boosted oil and gas production last year by 5 percent, although rising domestic consumption and political instability have limited exports.
But on Sunday, Sonatrach's CEO said the pipeline to Italy had an additional capacity that could be used to increase supply to Europe. The European Union relies on Russia for more than a third of its gas, and any disruption to flows would worsen an energy crisis that has already sent consumer bills soaring.
World’s Fifth Largest Provider
The current crisis with Russia due to the threat of invasion of Ukraine has caused concern at the European level about gas supplies. Lately, there have been talks of Gulf countries or the United States as an alternative to Russia, but without leaving the Mediterranean, Algeria is one of the main gas powers in the world.
To what extent can Algerian gas be an alternative for the continent's energy market? Algeria's main advantage is at the same time its greatest disadvantage. The North African country is "very competitive in pipeline gas to Spain and Italy because it’s the cheapest and easiest gas to transport," explains Aurèlia Mañé, an expert in the political economy of energy and Algeria at the University of Barcelona.
The problem is that the country has less capacity to export gas beyond the territories where these pipelines reach.
Algeria is the fifth country in the world in gas production, although -according to analysts- it does not have the infrastructure to distribute liquefied gas on a large scale, which allows this hydrocarbon to be transported by large vessels and not depend on gas pipelines. "In Algeria, there are liquefied gas facilities, but they are somewhat obsolete and need to be modernized and expanded," explains Mañé.
In the most catastrophic scenario, if Russia were to cut off or reduce gas supplies, Spain would be among the least affected countries, explains Thierry Bross, an energy specialist, and professor at Sciences Po in the French capital, from Paris.
In the north, the situation would be more difficult. He explains that the gas pipelines that reach Spanish and Italian territory from Algeria have practically no capacity to reach France or northern Europe.