Geopolitical Implications of Italy's Natural Gas Import Strategies

Essay By Marco Brun | CEO & Chief Commercial Officer | AleAnna  

Italy’s natural gas import strategies have far-reaching geopolitical implications, shaping its energy security, economic stability, and  foreign relations. As one of Europe’s largest importers of natural gas, sourcing approximately 73% of its natural gas needs from abroad  in 2022, Italy is heavily influenced by global energy markets and international politics. The country’s strategic diversification of supply  routes and investment in infrastructure are critical to mitigating risks and enhancing its energy independence. 

Italy’s Natural Gas Dependency and Key Suppliers  

Italy consumed 68 billion cubic meters (bcm) of natural gas in 2022, with imports constituting the majority of this demand. Historically,  Russia was Italy’s largest supplier, accounting for 40% of its imports in 2021. However, geopolitical tensions following the Russia Ukraine conflict prompted a significant shift. By 2023, Italy reduced its reliance on Russian gas to 15%, diversifying its supply to include  Algeria, Azerbaijan, and liquefied natural gas (LNG) sources. 

• Algeria: Algeria is now Italy’s top supplier, delivering 25 bcm annually via the Trans-Mediterranean (TransMed) pipeline. This  represents 36% of Italy’s total natural gas imports. 

• Azerbaijan: Through the Trans Adriatic Pipeline (TAP), Italy imports 10 bcm annually from Azerbaijan, accounting for 15% of its  gas supply.

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• LNG Imports: Italy has expanded its LNG infrastructure, with terminals in Rovigo, Panigaglia, and Livorno handling 15 bcm  annually, a figure expected to rise to 20 bcm by 2025. 

Strategic Diversification and Infrastructure Investments  

To enhance energy security, Italy has invested heavily in natural gas infrastructure. The TAP pipeline, operational since 2020, is a  cornerstone of Italy’s diversification strategy, connecting Southern Europe to the Caspian region. Additionally, Italy’s plans to develop  two new floating LNG terminals in Piombino and Ravenna by 2025 will increase its LNG import capacity by 10 bcm annually. 

Italy is also exploring renewable natural gas (RNG) production to reduce dependency on imports. By 2030, the country aims to produce  10 bcm of RNG annually, equivalent to 15% of current consumption. This initiative aligns with Italy’s broader goals of energy transition  and decarbonization. 

Geopolitical Implications  

Italy’s shift in natural gas import strategies carries significant geopolitical implications: 

1. Reducing Reliance on Russia: By diversifying suppliers, Italy has reduced its vulnerability to geopolitical risks associated with  Russian energy dependence. This shift aligns with the European Union’s REPowerEU plan, which aims to phase out Russian fossil fuels. 

2. Strengthening Ties with Algeria and Azerbaijan: Increased imports from Algeria and Azerbaijan have deepened bilateral relations.  For example, Italy-Algeria trade reached €7.5 billion in 2022, a 30% increase from 2021, driven primarily by energy cooperation. 3. Enhancing Transatlantic Relations: Investments in LNG imports, particularly from the United States, have strengthened Italy’s  ties with transatlantic partners. U.S. LNG accounted for 20% of Italy’s LNG imports in 2023, reinforcing shared commitments to  energy security. 

4. Positioning as a European Energy Hub: Italy’s geographical location and infrastructure investments position it as a key energy  transit hub for Europe. The TAP pipeline and LNG terminals enable Italy to re-export natural gas to neighboring countries,  enhancing its geopolitical influence within the European Union. 

Economic and Environmental Implications  

Italy’s diversification strategies are not without economic and environmental costs. The expansion of LNG infrastructure requires  significant investment, with the new Piombino terminal alone costing €900 million. Additionally, LNG imports are typically more  expensive than pipeline gas, potentially increasing energy costs for consumers. 

From an environmental perspective, increased LNG imports raise concerns about methane emissions during transportation and  regasification. However, Italy’s investment in RNG and carbon capture technologies aims to mitigate these impacts while supporting  theenergy transition. 

Challenges and Future Directions  

Despite progress, Italy faces challenges in achieving energy security. Rising global LNG prices, geopolitical instability in supplier  regions, and competition for resources with other European countries pose risks to its import strategies. To address thesechallenges,  Italy is: 

• Expanding renewable energy capacity, aiming for 55% of electricity from renewables by 2030. 

• Investing €25 billion in the EU Recovery and Resilience Facility to enhance energy efficiency and infrastructure.

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• Exploring hydrogen-ready pipelines to integrate hydrogen into the natural gas network, reducing reliance on fossil fuels. Conclusion  

Italy’s natural gas import strategies reflect a careful balance between energy security, economic considerations, and geopolitical  dynamics. By diversifying suppliers, investing in infrastructure, and embracing renewable alternatives, Italy is reducing its dependency  on traditional suppliers and enhancing its resilience to external shocks. As the country navigates the complexities of global energy  markets, its approach serves as a model for balancing energy independence with international collaboration, positioning Italy as a key  player in the European enrgy landscape.