Austria gas blast exposes Italy weak link

by Reuters
Thursday, 14 December 2017 07:39 GMT

(Repeats Wednesday's story with no changes to text)

By Stephen Jewkes

MILAN, Dec 13 (Reuters) - A deadly gas explosion in Austria has exposed a weak link in European energy security -- in neighbouring Italy.

The blast cut off a vital supply line for Italy, itself a crossroads for international gas pipelines feeding western Europe, and led Rome to declare an immediate state of emergency as gas prices soared on fears of an energy shortage.

Those fears and prices have since abated, as the gas link was restored on Tuesday night. But the blast reignited a simmering debate in Italy over the extent to which it should allow more gas pipelines to cross its territory.

Italy's opposition 5-Star Movement, the nation's most popular political party, said the explosion vindicated its opposition to pipelines, which were dangerous and entrenched reliance on foreign suppliers.

"This can only get worse," the party said.

Italy, at the intersection of eastern and western Europe, is a strategic part of European Union plans to wean itself off Russian gas, which accounts for a third of EU gas supplies.

Italy already brings gas ashore through four main pipelines, the one carrying Russian gas through Austria, another bringing Dutch gas from the north and two bringing gas under the sea from north Africa. The Austria connection is the most important, meeting around a third of Italy's gas demand.

Rome is working to bring onshore a fifth pipeline, the Trans-Adriatic Pipeline (TAP) which will bring Caspian gas to Europe from 2020, but this has hit grassroots resistance in southern Italy.

Michele Emiliano, governor of the southern region of Puglia, said the Austrian blast highlighted the dangers of gas. Though not opposed to gas pipelines in principle, he says the TAP developers and Rome have chosen the wrong site to bring the new pipeline onshore.

"(The government) is doing something reckless because of the mad rush they're in," Emiliano told state radio, noting the pipeline was being laid beneath a popular beach. He has suggested the pipeline come ashore near a town further north.

"Here is another explanation of our 'no' to projects like TAP," he added, referring to the Austrian explosion.

In a sign of jangled nerves over TAP, the European Bank for Reconstruction and Development and the European Investment bank (EIB) have both delayed approval of financing for the TAP consortium pending a resolution to the situation in Italy, sources said.

The EIB was due to decide on 1.5 billion euro loan to TAP on Tuesday but said it has postponed doing so until February.

The outcome of the Italian debate is crucial to the EU's broader energy goals.

Italy is seen as a natural corridor for bringing gas into the EU. It is the bloc's third biggest gas market with advanced infrastructure and industry know-how. Its main gas transport operator, Snam, is a prime mover in the EU's drive to turn its patchwork of pipelines into an integrated network.

In time, Italy is also planning to host a sixth gas pipeline, the EastMed project that will bring in gas from the Mediterranean area.

The Italian end of TAP is the last leg of the EU's priority plan for a new Southern Gas Corridor from Azerbaijan's giant Shah Deniz II field to the heart of Europe.

Around 10 billion cubic metres per year of gas should reach Europe by 2020 through TAP, the first non-Russian gas to supply Europe since Algeria's Medgaz link nearly a decade ago.

Currently, only a small amount of gas arriving in Italy leaves the country. However, Italy is working to connect its network to other EU pipelines.

Italian Industry minister Carlo Calenda said the Austria blast showed Italy should be accelerating the TAP project to ensure against over-reliance on any one pipeline.

"This is what TAP is all about ... if we had TAP we wouldn't have to declare a state of emergency," he said.

Opponents of more gas pipelines, such as 5-Star, want Italy to rely more on home-grown renewable energy. Italy generates more than 40 percent of its power from gas, almost all of it imported.

Rome is beefing up its green energy portfolio but is also phasing out coal power plants by 2025, leaving gas a major source of energy for many years to come.

(Additional reporting by Nina Chestney, Alissa De Carbonnel, Oleg Vukmanovic; editing by Giles Elgood)

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