Natural gas is a critical energy source in Italy, accounting for almost half of electricity generation. It will continue to play a central role in power generation in the coming decade, particularly as coal-fired capacity is being phased out. In the longer-term, natural gas will retain an important role as the principal source of dispatchable power and a key energy source for the buildings and industry sectors, even if the roles of biomethane and hydrogen grow. With gas consumption unlikely to fall significantly and domestic production remaining limited, Italy will remain heavily dependent on natural gas imports for the foreseeable future. Reducing dependence on Russian gas imports is a key objective in the short-term, and the government is aiming to achieve and maintain a more diversified range of gas supply sources for the longer-term, and ensure that adequate infrastructure is in place to facilitate imports.
The security of natural gas supply in Italy is aided by a significant volume of gas storage capacity, including 4.6 billion cubic metres (bcm) of strategic reserves. While Italy’s strategic gas reserves provide a valuable safeguard, these volumes can only be released in the case of an extreme gas supply emergency, and they cannot be used to supply consumers outside the household sector. The government evaluates the level of commercial gas stocks required in advance of the winter period each year and is currently investigating methods of incentivising industry storage injections.
Italy’s Emergency Plan for natural gas details emergency response measures that can be taken to avert or reduce the impact of gas supply disruptions. However, it is unclear how much additional supply or reduced demand could be achieved by most of these measures. The economic, societal and environmental impact of these measures is also unclear. The focus of Italy’s gas emergency measures is to respond to short-lasting disruptions. The government is aiming to enhance the security of natural gas supply by negotiating ‘solidarity agreements’ with a number of neighbouring EU countries.
Natural gas imports to Italy arrive through six pipeline interconnection points, and three (liquefied natural gas) LNG terminals. The vast majority of imports (over 90% in January 2022) come by pipeline.
Networks: transmission and distribution
Snam Rete Gas (SRG), part of the Snam Group, is Italy’s main gas Transmission System Operator (TSO). SRG operates a nationwide pipeline network of 32 000 km in length and supplies around 95% of the Italian market. All SRG pipelines have reverse flow capability. Società Gasdotti Italia is the second largest transporter of natural gas in Italy, operating pipeline network of around 1 300 km in length, mainly in southern Italy. Infrastrutture Trasporto Gas, also controlled by Snam, operates the 84 km Cavarzere-Minerbio pipeline, transporting gas from the Rovigo regasification terminal at the Adriatic LNG terminal to a national distribution network hub near Minerbio (Bologna).
The natural gas distribution sector operates under service concessions granted by local governments; only one network operator is allowed to distribute natural gas in each concession area. The most significant distribution company is Italgas (owned by Snam Group) which owns 28% of the distribution network. Other significant distribution system operators (DSOs) include 2i Rete Gas (19% of the network) and A2A (9% of the network). Beyond these three largest operators, the Italian gas distribution sector is highly fragmented.
The main TSO, SRG, is also planning to upgrade its network through a EUR 400 million project to install electro-compressors to replace seven existing turbo-compressors, which would increase efficiency and reduce emissions. The project is set to be completed by 2029.
LNG terminals and interconnections
Italy’s six pipeline entry points are: Tarvisio, Mazara del Vallo, Gries Pass, Gela, Melendugno and Gorizia. The combined import capacity of the six pipeline entry points is 360 million cubic metres per day (mcm/d).
The Tarvisio and Mazara del Vallo interconnections are by far the most significant import points by capacity; Tarvisio receives Russian gas from Austria via the Trans Austria Gas pipeline while Algerian gas arrives at Mazara del Vallo via the sub-sea Transmed pipeline. The Gries Pass interconnection can be used to import gas originating in north-west Europe from Switzerland while the Gela interconnection can be used to import gas from Libya via the sub-sea Greenstream pipeline. The Gorizia interconnection with Slovenia has a relatively insignificant quantity of reverse flow capacity for imports to Italy, and is rarely used for imports.
Since late 2020, Italy has been able to import natural gas through the Melendugno interconnection in the south-east which facilitates Azeri gas imports via the Trans Adriatic Pipeline. The utilisation rate of the Melendugno interconnection remains relatively low but has been growing. In the past decade, Italy has invested in infrastructure facilitating the reverse flow of gas from Italy into northern Europe. All of Italy’s northern gas interconnectors now have reverse flow capacity for exports.
In addition to the six pipeline entry points, natural gas can be imported through three LNG regasification terminals: the Adriatic (or Cavarzere) terminal off the Veneto coast in the north-east; the Panigaglia terminal near Liguria in the north-west; and the Offshore LNG Toscana (OLT) terminal near Livorno on the western coast in Tuscany. The three LNG terminals have a combined technical entry capacity of around 54 mcm/d.
The Adriatic LNG terminal is Italy’s most significant LNG terminal by import capacity. Its import capacity stands at 26.4 mcm/d, and it has an annual regasification capacity of 8 bcm. There is 250 000 cubic metres of storage capacity at the terminal. 80% of the regasification capacity at the Adriatic LNG terminal (6.4 bcm) is reserved for the import of Qatari gas in accordance with a long-term supply contract. The terminal is owned by Adriatic LNG, in which ExxonMobil Italiana Gas has a 71% share, Qatar Terminal Company Limited has a 22% share, and Snam Group has a 7% share.
The Panigaglia LNG terminal has a 13 mcm/d import capacity, and an annual regasification capacity of 3.5 bcm. The terminal’s storage capacity is 100 000 cubic metres. The terminal is limited by an inability to receive the largest LNG tankers, and mostly receives loads from smaller ships operating in the Mediterranean. It is operated by GNL Italia which is owned by Snam Group.
The OLT terminal has a 15 mcm/d import capacity, and an annual regasification capacity of 3.75 bcm. The terminal’s storage capacity is 155 000 cubic metres. It is owned by Offshore LNG Toscana, in which Snam Group has a 49% shareholding with the remaining shares owned by asset management group, First Sentier Investors.
Gas Storage facilities
Total natural gas storage capacity in Italy stood at 19.04 bcm. About 4.6 bcm of this capacity is dedicated to the storage of strategic stocks. The vast majority of natural gas storage capacity in Italy is located in 13 underground storage sites, mostly in depleted gas fields. These sites are the property of the state, which allocates operational control to industry players through concession agreements. The maximum nominal withdrawal rate from the natural gas storage system is 329 mcm/d, equivalent to 1.7 days of average daily demand in 2020.
Stogit, controlled by Snam, is by far the most significant operator of natural gas storage in Italy with 17.2 bcm (90% of total storage capacity). The Ministry for Ecological Transition (MiTE) has tasked Stogit with storing 97% of Italy’s strategic storage reserves, equal to 4.48 bcm. The remaining storage capacity is controlled by Edison Stoccaggio (865 mcm, including 140 mcm of strategic reserves) and Ital Gas Storage (1 bcm). Storage operators are required to make all their capacity available via auctions.
In addition to the Emergency Plan, the Ministry for Ecological Transition (MiTE) carries out risk assessments related to the security of gas supply every four years. The risk assessments are used to update the Preventive Action Plan, mandatory under EU regulation, which outlines measures to ensure the security of gas supply in Italy.
The latest Preventive Action Plan, published in 2019, found that Italy has sufficient transmission and storage capacity to meet demand, even in the event of an exceptionally cold winter. The MiTE’s assessment also found that Italy had sufficient natural gas import capacity to cover for a major loss of supply. Italy’s N-1 index was assessed at 120%. However, no scenarios in the assessment considered the impact of a prolonged significant disruption to natural gas supply, involving reduced supply from multiple interconnections.
At the regional level, Italy has sought to develop ‘solidarity arrangements’ with neighbouring EU countries, as required by EU regulation. The solidarity mechanism is a measure of last resort and designed to address extreme situations in which supply to protected customers is at stake. An agreement with Slovenia was signed in 2022 while discussions on solidarity arrangements with France and Germany are ongoing.
Italy’s natural gas infrastructure, 2022
The Ministry for Ecological Transition (MiTE) has overall responsibility for natural gas emergency policy in Italy. It maintains an Emergency Plan, which specifies the roles and responsibilities of various stakeholders in the event of a gas supply emergency, as well as the measures that can be taken in response. The Emergency Plan is periodically updated with the latest update occurring in September 2020.
Under the Emergency Plan, in the event of a major supply disruption, the MiTE would convene the Technical Gas System Emergency and Monitoring Committee. The Committee is chaired by the Chief of the Energy Department at the MiTE. It also includes representatives from MiTE’s Directorate General for the Security of Supply and Energy Infrastructure (DGISSEG), the gas TSO, the electricity TSO, gas DSOs, and suppliers. Outside of emergency situations, the Committee meets several times per year to discuss issues relating to the security of natural gas supply.
After assessing the situation, the Committee would make a recommendation to the MiTE on the appropriate emergency response measures to be taken; the final decision on implementing measures would be taken by the Minister for Ecological Transition. Italy’s Emergency Plan details three levels of natural gas supply emergency: ‘Early Warning’, ‘Alert’ and ‘Crisis’, based on the emergency levels established by EU regulation (2017/1938).
Early Warning level can be activated if there is an expectation of a significant reduction in import capacity or availability, if exceptionally high demand is observed/forecasted, or if the daily withdrawal rate from Italy’s commercial gas storage facilities in a given day is above 97% of the daily withdrawal capacity. On 26 February 2022, Italy activated the Early Warning level in response to Russia’s invasion of Ukraine.
The Alert level can be activated if the Early Warning level has already been activated and the situation worsens, if there is a severe reduction in import capacity or import availability, or if the total volume of requests to withdraw gas from Italy’s commercial gas storage facilities in a given day is above 100% of the daily withdrawal capacity.
The Crisis level would be activated if it is judged that Italy is experiencing a prolonged period of exceptionally high demand or a major supply disruption, and the actions of market participants can no longer resolve the situation.
In the power sector, there is potential to save around 10 mcm/d of natural gas through fuel switching, largely to coal (equivalent to around one third of average daily natural gas consumption from the power sector in 2020, or 14% of total gas consumption). The effectiveness of this measure will decline as additional coal-fired generation capacity is closed. Switching from gas to oil-fired power generation is theoretically possible, but would have minimal impact. Options for fuel switching outside the power sector are limited; large industrial facilities are not required to hold alternative fuel stocks.
Obligation for emergency gas storages
Total natural gas storage capacity in Italy stood at 19.04 bcm in 2021. Each year, minimum storage volumes for the winter period are set by the MiTE. The government enacted a decree in March 2022 mandating that Italy’s total gas storage capacity must be filled to at least 90% of total capacity in advance of the 2022-2023 winter period. Before the 2022/2023 winter, Italy filled its storage capacity to over 90%, as per an Italian decree enacted in response to the war in Ukraine. EU regulation requires that storage facilities are filled at 90% level by 1 October starting in 2023.
About 4.6 bcm of Italy’s 19.04 bcm total natural gas storage capacity is dedicated to the strategic gas reserves. However, there are restrictions concerning the release of these reserves; strategic storage volumes can only be released if gas import capacity is at its maximum and all commercial storage volumes have been released; strategic gas stocks can only be used to supply household consumers as the use of strategic gas stocks requires low pressure in the gas system, meaning they can only be used when industrial consumption is already limited. Note that Italy’s strategic gas stocks have never been released.