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Italian Grid Operator Increases Investments to $12.5 Billion

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next…

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By Cyril Widdershoven ↗ – Jan 26, 2024, 3:00 PM CST

Italy is enhancing its overall energy security by significantly increasing investments in both energy transition and conventional hydrocarbon infrastructure. By 2027, the Italian grid operator SNAM will invest approximately $12.5 billion or 11.5 billion euros in its energy transition business, covering transport, liquefied natural gas infrastructure, and storage. This represents a 15% increase from its previous strategic plan (2026), with a primary focus on improving the overall flexibility of its energy system.

According to SNAM, EUR 7.4 billion will target transport, involving the replacement or refurbishment of 900 kilometers of pipelines, establishing connections with biomethane plants and floating storage regasification units (FSRU), and constructing compressor stations. Additionally, EUR 1.4 billion will be used to expand or upgrade storage sites, and EUR 1.5 billion will be spent on LNG infrastructure. Simultaneously, the company expects to invest EUR 1.2 billion in energy transition efforts, including the commissioning of biomethane plants, carbon capture and storage, hydrogen, and energy efficiency.

The Italian grid operator reiterated that a significant portion of the investments will go to the Adriatic Line, a new pipeline aimed at increasing capacity to transport gas from southern Italy to industrial centers in the north. The primary gas source in the south is pipeline gas from North Africa, including Libya, Algeria, and potential new flows from Egypt. The new pipeline setup will also be part of SNAM’s hydrogen-ready network, known as SoutH2, with the main supply expected from North Africa or potentially MENA. Italy aims to become one of the main renewable energy hubs for Europe in the long term.

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In addition to the push for renewable energy and expanded LNG options, the grid operator is collaborating with Italian oil and gas major ENI to establish a carbon capture and storage hub offshore Ravenna. This aligns with SNAM’s commitment to achieving net-zero by 2050. The company will also invest in energy transition businesses, including a carbon capture and storage hub and the development of a European hydrogen network.

SNAM’s CEO, Stefano Venier, emphasized that the EUR 11.5 billion investment aims to develop an increasingly flexible infrastructure linked to Italy’s carbon neutrality pathway. The operator expects an average annual growth of 7.4% for adjusted core earnings in the period 2024-2027, compared to 7% in its previous plan (2026). Adjusted net income is projected to rise by around 4% each year on average, up from 3% in the previous strategy. Net debt is expected to reach 19 billion euros by 2027, with the average cost of debt projected to rise to 2.6%.

Venier highlighted the need to take all measures to counter potential energy supply security issues in Italy. In the face of a challenging and volatile global energy context, SNAM’s investment aims to strengthen energy security, ensuring diversified and sustainable supplies in the long term and supporting the transition path, including projects considered strategic at a European level.

Concerns about the security of energy supply in Italy have heightened recently due to growing insecurity in the Middle East, particularly focusing on Houthi attacks in and around the Red Sea–Bab Al Mandab region. Qatar, the world’s second-largest LNG exporter, has already announced delays in some shipments to Europe due to the crisis in the Red Sea, leading to longer travel times. Doha is reshuffling its global supply flows, with delays and diversions expected to continue. QatarEnergy has officially diverted six LNG shipments to Europe since January 15. For Italy, the situation has worsened, as QatarEnergy has indicated that its scheduled LNG cargo for early February at the Adriatic terminal of Italian energy company Edison is now set to reach port later in February. In response, Edison Italy confirmed that an LNG shipment scheduled for January 31 to February 5 will not be delivered.

Italian energy supply also still is under pressure of ongoing instability inside of Libya, while the pressure is on for Egypt’s LNG potential. The Red Sea crisis could not only be spilling to other regions, while internal security and instability of Egypt is threatening all too.

By Cyril Widdershoven for Oilprice.com

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Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently he works as a Senior Researcher at Hill Tower Resource Advisors. Next…

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