Eni's Scaroni optimistic Libya gas secure in case Russia supplies hit, but amounts still small

MILAN – The CEO of Italian energy company Eni says he’s optimistic that Italy has a secure gas supply from Libya in case imports from Russia are hurt by sanctions. But the amounts, analysts warn, are dwarfed by the size of Russian supplies.

Italy and other European countries are assessing their energy supplies amid concerns that imports from Russia might be pinched in the case sanctions between Moscow and Western powers are escalated. For Italy, Libya has been a key source of gas, but the country’s production has not recovered fully since its civil war in 2011 due to continuing security issues.

Amid the uncertainty, Paolo Scaroni went to Libya last weekend to assess the situation.

“I wanted to assure myself of the security of the alternative supplies for our country in case the situation worsens” with Russia, Scaroni told Corriere della Sera newspaper in an interview published Tuesday.

Scaroni said interim Libyan prime minister, Abdullah al-Thinni, the former defence minister, “made a good impression,” and praised him for his handling of internal regional disputes as well as a recent attempt by rebels to illegally sell oil to North Korea.

Scaroni told the Libya Herald in a separate interview that besides interrupting supplies, shutdowns caused by strikes and unrest risk permanently damaging extraction by hurting the geology of the field, which requires natural pressure.

Eni produces gas in Libya used to generate domestic electricity and also for export to Italy via the Greenstream pipeline, which is solely for domestic Italian consumption.

The pipeline’s capacity is 9 billion cubic meters a year, but last year less than 6 billion cubic meters were transported due to security issues in Libya, said Nicolo Sartori, an energy expert at Rome’s Rome’s IAI Institute.

The Libyan supply is important to Italy’s energy security, but not nearly enough to replace a shortfall if Russia should halt supplies, Sartori said.

Last year, Italy consumed 70 billion cubic meters of gas, with 30 billion cubic meters arriving from Russia. Algeria is the other main supplier, but supplies were drastically reduced to 12.5 billion cubic meters in 2013, from 20 billion cubic meters a year earlier, because of a price disagreement.

Scaroni told the Corriere paper that he is optimistic the Algerian supply is stable even with elections upcoming on April 4.

“The price will be higher, but Algeria has the capacity to export,” Sartori concurred.

Eni is the largest international oil company operating in Libya, currently producing 250,000 barrels of oil equivalent daily — down from 280,000 barrels before Libya’s 2011 civil war.

Scaroni was travelling to Washington for meetings with the U.S. State Department this week. He told Corriere the focus would be on oil prices and “the potential problem of supply security.” He said the U.S. boom in gas production will be of little help to Europe in case Russian supplies are limited.

“Unlike petroleum, which is bought just about anywhere, gas requires infrastructure, a liquefying plant, ships, regasification plants. It’s not about opening a tap and closing another,” Scaroni told the daily Corriere.