INTERVIEW: Italy’s LNG regasification capacity growth central to Russian gas displacement: Snam

Italy's LNG infrastructure build-out has been pivotal in reducing its dependence on Russian pipeline gas, as total import capacity is expected to reach some 28 Bcm/year by 2025, Elio Ruggeri, director of LNG at national transmission system operator, Snam, told S&P Global Commodity Insights.

This comes as the operator's latest LNG infrastructure project, the Ravenna FSRU, is expected to begin operations in the first quarter of 2025, with installation of the floating import facility set for late February, according to Ruggeri.

"The Ravenna FSRU effectively completes the plan initiated in 2022 at the start of the Russian invasion of Ukraine," Ruggeri said on the sidelines of the World LNG Summit in Berlin. "Prior to 2022, we were importing about 30 Bcm/year of Russian [pipeline] gas."

Alongside gas storage and existing pipeline import capacities, Italy's expanding LNG infrastructure portfolio would "allow the Italian system to react safely to future supply shocks," Ruggeri said.

The project's corresponding vessel, the BW Singapore, is set to arrive at the port of Ravenna by Christmas. Pipelines enabling the connection to the offshore jetty were said to be complete, while the jetty itself will reach mechanical operation in the next few weeks, according to Ruggeri.

LNG accounted for around 25% of Italian gas imports so far in 2024, with Italy importing a total of 33.55 million mt (46 Bcm) of LNG since 2022, data from Commodity Insights showed.

Further development of planned projects could see LNG imports cover one-third of Italy's annual gas needs in the coming years, according to Snam.

Italian imports of LNG have totalled some 10.54 million mt so far in 2024, with most supplies sourced from Qatar (4.84 million mt), followed by the US (3.72 million mt) and Algeria (1.45 million mt), the data showed.

This comes as spot LNG prices for delivery into the East Mediterranean have softened in recent weeks on the back of easing supply conditions.

Platts, part of Commodity Insights, assessed the spot LNG East Mediterranean Marker for January delivery on a DES basis at $12.618/MMBtu on Dec. 13, down by some 3.55% on the day.

Infrastructure developments

Since Russia's invasion of Ukraine in 2022, Italy's rapid implementation of LNG infrastructure has seen its displacement of Russian molecules align with the EU's wider goal of completely ending imports of Russian fossil fuels by 2027.

Under its mandate given by the Italian government, Snam steered the build-out of LNG infrastructure largely through FSRU deployment, managing variable flows alongside a domestic gas pipeline network spanning some 38,000 km.

By the first quarter of 2025, the operator will have put into operation two greenfield FSRU-based projects since 2022, each with 5 Bcm/year capacity (Piombino and Ravenna) and upgraded the OLT Terminal's regasification capacity by 30%, extending its operative life until 2044, Ruggeri said.

"We have much to integrate and operate before entering into a possible next development phase," Ruggeri said.

On Dec. 3, Snam entered into a co-controlling stake alongside Dutch company VTTI at Italy's largest LNG terminal, the 9.6 Bcm/year Adriatic LNG Terminal, exercising its right to raise its existing stake in the terminal from 7.3% to 30%, a move Snam CEO Stefano Vernier said would bolster Italy's supply security.

"I think everyone recognizes the strategic role LNG infrastructure has played in securing Italy's supply," Ruggeri said. "I believe this will continue to be the case, as valuable lessons have been learned."

Winter risks

Price spikes in European gas markets have largely been driven by supply-side shocks in recent weeks, as ongoing uncertainty of the Russia-Ukraine transit agreement and colder weather conditions prompted a sharp draw on EU-wide gas stocks.

EU-wide gas storages were recorded at some 76% full as of Dec. 14, while Italian gas storage facilities remain among the healthiest in Europe, recorded at around 84% full over the same period, according to data from Gas Infrastructure Europe.

Ruggeri said there was little concern surrounding a lack of Russian gas through the upcoming winter in Europe.

"However, we must be cautious about how we fill storages next summer, when the expected additional global LNG production will also contribute to keeping the market in balance," he said.

Despite this, Europe could be set to face a "high-price environment" in 2025, with market tightness expected to loosen in 2026 once more LNG supply is expected to come onstream, Ruggeri said.