Italy Declares State of Emergency, But Stocks High (Update)
(Updates, with price comment at end)
Italy's economic development ministry declared a state of emergency midday December 12, following the morning's fatal explosion at Austria's Baumgarten gas hub and its consequent disruption to Russian gas into Italy and southeast Europe. It confirmed that operation of the TAG pipeline that transports some 30bn m³/yr of Russian gas from Slovakia via Baumgarten to the Italian entry point at Tarvisio has been suspended.
But Italian gas grid operator Snam has indicated it expects the halt in Russian flows to Italy to be short-lived.
Snam said at 12.45pm Italian time (11.45am GMT) December 12, following the Baumgarten incident, that "gas import flows from Russia have been temporarily interrupted. On the basis of the information currently available, supplies could resume today if the first indications on the absence of damage to transport infrastructure are confirmed. In the meanwhile, the security of the Italian system is guaranteed by the storage facilities made available by Snam. As expected in these situations, the [Italian] ministry of economic development has declared a state of emergency."
A state of emergency enables the ministry to invoke certain powers in order to manage the national system, but consumers on the ground are unlikely to perceive any difference to their supplies.
The ministry said: "This morning the flow of gas from Russia was interrupted in Austria to deal with a fire at the stretch of network managed by operator Gas Connect Austria. As a consequence, the operation of the gas pipeline connecting Austria through the Baumgarten node to the Tarvisio entrance of the Italian national network was suspended."
"In any case, the supply of gas to Italian consumers is assured because the non-importation is covered by a greater supply of gas from the national underground gas storage facilities," it continued. "In line with European regulations and [Italy's] national emergency plan, the ministry has therefore declared a state of emergency. The ministry will constantly monitor the situation in contact with the operators concerned in order to verify how long will be required to resume flows."
TAG (or the Trans Austria Gasleitung) pipeline system runs from the Slovak border with Austria, through Baumgarten to the Italian border over a distance of about 380 km, and has three parallel pipes, which typically transport about 30bn m3/yr.
Italian gas inventories are more than ample, with 160.29 terawatt-hours of gas (14.9bn m3) in underground storage as at 6am on December 10, which means that total storage capacity in Italy was 83.1%-full. That's only fractionally less than on the same day in 2016 when 165.3 TWh-gas were stored. Part of the inventories are at the government's disposition, and part belong to market operators.
Gas consumption in Italy has increased strongly this year but, when considered against 2016 full year Italian consumption of 69.5bn m3 (according to Eurogas data published in April 2017), Italy's gas storage inventory of about 14bn m3 should keep disruption to Italian consumers to a minimum.
According to market analysts at Alba Soluzioni, the December 11 day-ahead price was €23.35/MWh, while the December 12 within-day price traded up to €50/MWh with a very wide bid-offer spread of €52.00-€74.975/MWh at 16.30 market close.
The range was so wide owing to uncertainty over whether action will be taken under Italy’s emergency plan which would force a settlement price of €82.60/MWh, Alba Soluzioni said. The government had last week issued an early warning, as cold weather bit and demand rose above the normal. Shippers can respond by using market measures, such as invoking interruption clauses in end-user contracts.
(The photo displayed with this article is Snam's gas despatching centre; photo courtesy of Snam)