The Growing Importance of Libya’s Gas Supply

In the last week of March, the head of ENI, Paolo Scoroni, met with Libya's interim prime minister Abdullah al-Thinni, to consider the strategic role of Libyan gas to Italy, as the Ukraine crisis highlights Italy's reliance on supply from Russia.

After eight months of delays and closures for Libya’s energy sector, some progress occurred in early April with new talks between rebel groups and the current government.  Rebels groups have occupied a number of oil and gas facilities for months, stifling Libya’s energy output.  Meanwhile, sanctions imposed on Moscow by the international community have created a new threat to European gas supply security.

GREENSTREAM PIPELINE

Greenstream is a submarine natural gas pipeline running from Libya to Italy.  Its transit capacity is 9 billion cubic meters (bcm) a year, but last year less than 6 billion cubic meters were transported due to security challenges that face Libya, according to Nicolo Sartori, an energy expert at Rome’s Instituto Affari Internazionali (IAI). Libyan supply is important to Italy's energy security and Greenstream’s capacity is not nearly enough to replace a shortfall should Russia stop gas supply to Ukraine. Italian authorities pointed out that the maximum import capacity of the Greenstream pipeline is around 10 bcm per year, while a further 6-7 bcm per year could come from LNG supplies via the Panigaglia and Livorno terminals, both of which currently have outputs of zero.

LIBYA’S LOST EXPORTS

The loss of export revenue due to the disruptions in Libya are evaluated by Bloomberg at 7 billion USD as numbers dropped to 85,000 barrels per day from 1.6 million bpd before the Arab Spring uprising. This now coincides with a renewed risk of interruption in Russian gas flows, pushing European countries to reconsider gas transit from North Africa. Spain has begun reconsidering increasing its gas supply from Algeria and Italy has turned to improving the conditions of Greenstream from Libya. ENI is the biggest foreign oil and gas company acting in Libya and ENI’s output and revenues have been hit by turmoil since the fall of Muammar Gaddafi. In March, earlier this year, international energy giant BP also announced it would postpone exploration projects in Libya's Ghadames basin due to security concerns.

ITALY’S WELL-EQUILIBRATED GAS SUPPLY MAP

Italy is the third largest gas consumer in the European Union after the United Kingdom and Germany. Italy is not on the EU’s list of energy security vulnerable countries and has a well-equilibrated gas supply map,  meaning it does not need to multiply its energy supply in the short term. Algeria is Italy's main supplier, though its share does not exceed 36.6% of Italy's domestic gas consumption. Russia, Libya, and the Netherlands also supply, respectively, 19.6%, 12.5%, and 4.2% of the Italy’s gas need. In addition to this well-structured supply system, Italy has a reliable storage capacity of 14,417 mcm, the second largest in the EU, after Germany. Additionally, the first leg of the Southern Energy Corrirodor, the Azeri-Turkish joint Trans-Anatolian Pipeline (TANAP) and the corridor' second leg, the Trans-Adriatic Pipeline (TAP), will deliver Azeri gas through Greece and Albania to Italy.

IN CASE OF LONG-TERM INTERRUPTION

Last month, the head of parliament's Copasir committee gave an interview to Platts and stated that “Italy has gas reserves that would allow a few months of supplies in a condition of ordinary activity” but added that “should the interruption be a long-term one, the system would not cope in those conditions.” In addition, ENI's Chief Executive Officer Paolo Scaroni has said Italy's gas supply structure allows it to overcome any crisis involving a single supplier, but that it would face serious problems if muktiple providers went down.

U.S. DEEPENS SANCTIONS

Since the beginning of the Ukraine crisis, the European energy market is fearing a high disruption in gas supply, as happened during the 2006 and 2009 crises, when Bulgaria was met with 100% supply disruption, as did Serbia and Bosnia-Herzegovina,  Greece experienced a 80% disruption, Croatia 40%, and Romania 34%. US President Barack Obama announced at the end of the last EU-US meetings that the EU and the US agreed to coordinate on potential deeper joint sanctions if Russia engages in further incursions in Ukraine. As such, ensuring reliable gas supplies from countries like Libya is becoming an increasingly essential part of European policy.

 Olgu Okumus

olgu.okumus@sciences-po.fr