Edison SpA (EDN.MI) said Saturday a new offshore regasification terminal reached Italy, opening a new natural gas route into the European Union and curbing Italy's dependency on Russian imports.
The liquefied natural gas facility, based near the northeastern Italian town of Rovigo and which will have a capacity representing about 10% of Italy's gas demand, will bring Edison closer to becoming independent of its biggest rival for its gas supplies, Eni SpA (E).
The new gas-receiving terminal reached via sea its destination in Italy after leaving its construction site in Spain at the end of August. The plant has gas supplies from Qatar guaranteed for 25 years.
"I would say this is extremely important for both Italy and the European Union," said Chief Executive Umberto Quadrino in an interview with Dow Jones Newswires. Italy's gas supply for the last years has not been adequate. This new terminal provides a fundamental contribution for Italy and opens a new path for importation (for Europe)."
The facility, which is owned 45% by Exxon Mobil Corp. (XOM), 45% by Qatar Petroleum and 10% by Edison, will have an annual capacity of 8 billion cubic meters. Edison said the terminal will receive its first LNG cargo and commence the cool-down process in the first quarter of 2009 with first gas send-out expected a month or so after the cool-down.
"We have now a infrastructure which contributes to solve the safety of the national energy system and diversifies the supply source," Quadrino said.
Quadrino attended Saturday a ceremony with Italian Prime Minister Silvio Berlusconi, along with Italian Industry Minister Claudio Scajola and U.S. Ambassador to Italy Ronald P. Spogli, near Rovigo to mark the arrival of the terminal.
Edison, which is controlled by Electricite de France (1024251.FR) and Italian municipal utility A2A SpA (A2A.MI) will have access to 80% of the terminal's gas, or 6.4 billion cubic meters annually.
The Milan-based company is seeking new sources to free itself from gas sold by Eni.
Italy currently has only the Panigaglia LNG terminal, owned by Eni's Snam Rete Gas SpA (SRG.MI), and which is more than 30 years old.
Edison is at the forefront of Italy's drive to reduce the country's dependency on Russian gas, which provide around one-third of imports. Algeria provides roughly another third.
Edison owns a stake in Galsi, the company working on building a gas pipeline that will connect Italy and Algeria via the island of Sardinia. The pipeline, expected to be operational in 2012, will initially transport 8 billion cubic meters of Algerian gas a year. Edison has signed for an annual supply of 2 billion cubic meters.
Quadrino said that the wheels for Galsi are in motion and that the final investment decision for Galsi will be made in 2009.
Furthermore, Edison is investing in a pipeline, known as IGI, connecting Italy to the Caspian area via Greece and Turkey, to be in operation by the end of 2012 as part of the E.U.'s to diversify away from Russian dependency.
An initial intergovernmental agreement signed by Italy and Greece in 2005 was later followed by one signed by Italy, Turkey and Greece in July 2007 and by one between Italy and Azerbaijan in December of the same year, for the transit corridor to transport natural gas from the Caspian Basin by way of Turkey and Greece, which share a pipeline connection since November 2007.
Quadrino said a final four-way political agreement between Italy, Greece, Turkey and Azerbaijan could be signed in the coming months for gas transport. After this, Edison hopes to sign a contract for gas supply with Azerbaijan by the end of 2008.
Spogli said that the U.S. was in support of alternative gas routes for Europe, such as Edison's IGI project.
Demand for gas is forecast to grow by an average yearly 1.8% between 2007 and 2020, when it should reach annually 720 billion cubic meters, according to Edison data. As domestic output will decline with depleted fields, gas imports in the E.U. are expected to double to 500 billion cubic meters in 2020 from 2006.
"The new import logistics (Rovigo, Galsi and IGI) should allow Edison to diversify its procurement, reducing its dependence on purchases to almost zero," wrote Nicola Porcari, an analyst with Exane BNP Paribas, on Sept. 3. He rates the company outperform.