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

In 2022, Italy consumed 68 billion cubic meters (bcm) of natural gas, with imports fulfilling the majority of this demand. Historically, Russia was Italy’s largest supplier, providing 40% of its imports in 2021. However, the Russia-Ukraine conflict triggered a significant shift in Italy’s energy strategy. By 2023, Italy reduced its dependence on Russian gas to just 15%, diversifying its sources to include Algeria, Azerbaijan, and liquefied natural gas (LNG).

Algeria has emerged as Italy’s primary supplier, delivering 25 bcm annually via the Trans-Mediterranean (TransMed) pipeline, which now constitutes 36% of Italy’s total natural gas imports. Azerbaijan also plays a key role, supplying 10 bcm annually through the Trans Adriatic Pipeline (TAP), accounting for 15% of Italy’s gas needs. In addition, Italy has expanded its LNG infrastructure, with terminals in Rovigo, Panigaglia, and Livorno collectively handling 15 bcm of LNG annually, a volume expected to grow to 20 bcm by 2025. These diversification efforts have significantly bolstered Italy’s energy security and reduced its vulnerability to geopolitical disruptions.

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 has far-reaching geopolitical implications. By diversifying its suppliers, Italy has significantly reduced its reliance on Russian energy, decreasing its vulnerability to geopolitical risks. This move aligns with the European Union’s REPowerEU plan, which seeks to phase out Russian fossil fuels and strengthen energy independence across member states.

Increased imports from Algeria and Azerbaijan have also deepened bilateral relationships with these countries. For instance, Italy-Algeria trade reached €7.5 billion in 2022, marking a 30% increase from the previous year, largely driven by energy cooperation. Similarly, Azerbaijan’s contributions through the Trans Adriatic Pipeline (TAP) have bolstered ties while ensuring a stable supply of natural gas.

Italy’s growing investments in LNG imports, particularly from the United States, have further enhanced transatlantic relations. In 2023, U.S. LNG accounted for 20% of Italy’s LNG imports, underscoring shared commitments to energy security and collaboration. Additionally, Italy’s geographical advantage and robust infrastructure position it as a key energy transit hub for Europe. With the TAP pipeline and expanded LNG terminals, Italy can re-export natural gas to neighboring countries, strengthening its geopolitical influence within the European Union and reinforcing its role in Europe’s energy landscape.

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 the energy transition.

Challenges and Future Directions

Despite progress, Italy continues to face challenges in achieving energy security. Rising global LNG prices, geopolitical instability in key supplier regions, and heightened competition for resources with other European countries pose significant risks to its import strategies. In response, Italy is pursuing several measures to mitigate these challenges and strengthen its energy resilience.

One major focus is the expansion of renewable energy capacity, with a target of generating 55% of its electricity from renewables by 2030. This transition not only reduces dependence on imported fossil fuels but also aligns with broader climate goals. Italy is also investing €25 billion through the EU Recovery and Resilience Facility to enhance energy efficiency and modernize its infrastructure, ensuring a more reliable and sustainable energy system.

Additionally, Italy is exploring the integration of hydrogen into its natural gas network by developing hydrogen-ready pipelines. This innovation aims to reduce reliance on traditional fossil fuels while supporting the transition to cleaner energy sources. These combined efforts demonstrate Italy’s commitment to overcoming current challenges and achieving a more secure and sustainable energy future.

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.