Italy exports first gas as Snam seeks to build up trading hub

Rome

ITALY exported natural gas for the first time last week, part of an effort by the nation's pipeline operator to build up southern Europe as a centre for trading the commodity.

Snam SpA is working to increase the flexibility of its system so that gas from southern Europe and Africa can reach central Europe. Chief executive officer Marco Alvera wants to establish a trading hub for the fuel in southern Europe that would add options to satisfy demand and put to use storage facilities in Italy.

The milestone, which took years of planning and investment by Snam, will deepen the connections between Italy's network and the heart of the gas trading business in northern Europe. Britain and the Netherlands are the two main hubs for the commodity in Europe, and Mr Alvera would like to raise Italy's importance to the industry.

Switzerland has drawn about three million cubic metres of gas a day from Italy since March 14, according to data released by the pipeline operator on Monday. Snam invested in facilities that reverse the flow of the import pipeline, which usually brings Russian gas to Italy.

"We expect to increase our investments in favour of the security and flexibility of the Italian gas system, which on several occasions over the last few months has shown greater reliability compared to other European countries," Mr Alvera said in a strategy presentation to investors last week.

There were dry runs of the new capability in February, representing the first time Italy has ever exported the fuel. The pipeline now has reverse flow valves that allow it to move gas in both directions.

The current capacity at the junction of Gries Pass is five million cubic metres. That will be boosted to 40 million cubic metres after further investments, the company said in its strategy presentation last week.

The grid upgrade is due to be completed by October 2018. After that, Snam will likely have export destinations from Switzerland and Germany to France and Northern Europe. Ultimately, Mr Alvera is seeking to draw more gas from the Caspian Sea region and North Africa, giving Italy additional sources of gas.

Russia is the source of about a third of Europe's gas, and tensions are mounting with Vladimir Putin's government in Moscow over the poisoning of a former spy for Russia in the UK. Britain and Germany have said they want to build up alternatives to Russian supply, though there are few tangible projects on the horizon.

Snam said last week it boosted its five-year investment target by 10 per cent to 5.2 billion euros (S$8.4 billion) by 2021, with the largest chunk of investments allocated to the upgrade of its distribution network. BLOOMBERG