Better Politics Could Lead Italy Towards a Technologically Advanced Energy Market
Natural Gas Europe was pleased to have the opportunity to speak with Luciano Butti, Lawyer and Partner at Butti & Partners. We spoke about Italy's prospects in terms of shale gas, LNG and energy security.
In its report about shale gas reserves in the world, the US Energy Information Administration did not take into consideration Italy. What’s the reason?
This is probably a consequence of the lack of thorough investigation on the subject, which the Italian government should promote, especially in these times of crisis and changing markets, including the energy market. Just over a month ago, the new Italian Prime Minister Letta took an open-minded approach towards new energy resources, including shale gas, and we hope to see improvements on the technical investigation front in the coming months too. However, there has so far been no transparent scientific investigation into the possible risks of extracting non-conventional gas. These risks are highly overrated by public opinion and there is a tendency (often devoid of any scientific basis) in Italy in particular to see any such operations as a source of seismic risk. The only way to overcome these misapprehensions is to deal with them in a transparent manner right from the beginning. Trying to get round them does not lead anywhere.
Do you know of any shale gas projects in Italy?
The Independent Resources PLC project in Tuscany should be the only unconventional gas extraction project under way to date. It is believed that, besides Central Italy, there may be resources in the North (the Po Valley) and probably in other areas. However, deeper investigation is needed through specific studies. Regarding the first experiments carried out in Tuscany, the press has mentioned that Independent Resources PLC uses a “hydraulic fracture operation coupled with a ceramic proppant,” but more specific information has not been made public.
What is the relationship between the Italian legislation and the one stemming from Brussels?
The EU is watching the development of shale gas technology with great interest, even if it considers that 1) all the possible risks associated with using this technology still have to be investigated; 2) reference best available techniques (BAT) have to be defined; 3) the activities should be strictly regulated administratively by each member state. In the absence of European legislation and guidelines, Italy has not "moved" proactively, as several other countries have done, such as Poland. It should however be noted that the directions taken by states that have technically investigated and tested the use of shale gas are not unique. Some of the states that had previously authorized this activity are now thinking of limiting systems/moratoriums pending further study into the environmental consequences of exploiting this resource.
What is the regulatory framework for shale gas operators in Italy? Are there any specific laws applicable only to shale gas operators (and not to companies involved exclusively in conventional gas activities)?
There are no specific regulations concerning shale gas in Italy. We therefore have to refer to the laws on energy and oil and gas extraction as well as the legislation regarding the other sectors involved (mining, chemicals, water, and ecosystem and landscape protection). The main problems that need addressing are three. Firstly, our densely populated country, which makes it difficult to find room for the large buffer zones needed for extraction by fracking. Secondly, the problematic seismic activity. Thirdly, the use of chemical substances in contact with metamorphic rocks. Furthermore persistently unclear national and regional legislation on environmental matters and the unfailing local opposition to the infrastructures that have to be built are no less relevant.
Are there any ways out?
We need European input, which could come soon in the form of the 2050 Energy Roadmap. This plan “has identified that shale gas and other unconventional sources have become potential important new sources of supply in or around Europe.” A general reference framework for exploration and extraction activities already exists in Europe (Hydrocarbons Directive regarding the issue of licences for exploration/production activities; EIA directive; Water Framework Directive; Mining Waste Directive; REACH regulation; Wild Birds Directive and Natura 2000 sites for the protection of biodiversity; Aarhus Convention on access to information; Environmental Liability Directive; International Emissions Trading Directive 2003/87/EC concerning the possible release of methane). However the EU Parliament has recommended that the Commission and Member States should draw up more specific regulations. With a view towards the future, Europe is promoting both economic and "social" surveys and investigations and is starting to regulate shale gas extraction and handling activities clearly, where already implemented.
Speaking about Liquefied Natural Gas (LNG), do you expect major developments in Italy? How long does it take to plan and build a LNG plant in Italy?
LNG could definitely be developed more in Italy. There are several projects to build LNG terminals, but the problems encountered in the development of shale gas are not lacking for LNG either, at least in terms of social confrontation (the NIMBY - not in my backyard - syndrome). I do not know in detail how long it takes to build a plant. I imagine it varies significantly according to the best practices applied. However I believe that the main factor that has to be taken into account in Italy in particular is the time it takes to complete administrative procedures and obtain licences, which is often very long (even though the Government is now acting to ensure compliance with specific time limits).
How do you evaluate Italy in terms of energy security? How can things get better?
In terms of energy supply, Italy could leverage the resources at its disposal more and better. It can do this without - of course - forgetting safety, without forgetting to implement BATs for the industry and without forgetting to monitor both the building and running of plants.
What is needed to grow in this area?
In a nutshell: 1) technical investigation, including cost-benefit analyses, without political interference; 2) dissemination of all the technical information collected and promotion of the positive aspects among the Italian people; 3) "constructive" public participation aimed not at avoiding problems, but solving them; 4) the drawing up of clear, mutually acceptable, European and national legislation; 5) openness to experimentation; 6) constant monitoring of the results acquired during plant building.
What is the most important factor to promote energy liberalization and the development of research into non-conventional fuels in Italy?
I have no doubt about the answer: the decisive aspect for the success of these operations in our country is to investigate - in advance - the population's concerns about the possible environmental impact and risk (environmental, geological and seismic) of new technology through adequate scientific research. These scientific investigations should be included officially in the licensing documentation our legislation requires. If these aspects are addressed in a transparent manner right from the start with adequate scientific and legal analysis, new technology might even be developed in Italy; otherwise, the NIMBY syndrome is bound to prevail, resulting in the loss of initial investments. In short, there are multifarious steps to be dealt with, but the development of new energy supply systems could lead to the creation of new development prospects, especially in times of crisis.
In conclusion, can you please describe the structure of the Italian gas market?
The "conventional" gas market in Italy was substantially liberalized on 1 January 2003, as part of a process which is still ongoing. There is a single contract that governs the relations between the companies that run the distribution systems, the marketing companies, and the wholesalers that use the systems themselves. The players in the management chain are four. Firstly, the transporter that owns/manages the gas transport infrastructures. Secondly, the wholesaler who is the owner of the gas in the pipelines operated by the transporter. Thirdly, the distributor who is the owner or concessionaire of the distribution networks. Finally, the marketing company. In addition to these, there are of course the producers, which are often foreign countries. Each activity is – of course – subject to specific licences. The single contract allows uniform market management, without imposing financial restrictions. But keep in mind that there are no specific regulations for shale gas.