Italy Turns to Oil-Fired Power Plants as Russia Trims Supply

Italy turned to oil-fired power stations after lower Russian natural-gas deliveries forced the country to declare an emergency as freezing conditions gripped Europe and pushed up heating demand.

Italy’s industry ministry yesterday sanctioned the use of six Enel SpA-operated oil-fired power plants to reduce gas use. Italian emergency gas reserves haven’t yet been used, it said. Stocks of the fuel remain high across Europe due to a mild start to the heating season which began in October. Imports of liquefied natural gas by tankers may be boosted, the ministry official said, declining to be named in line with policy.

“The situation is rather critical as Russia and France reduced supplies,” Italian Development Minister Corrado Passera told reporters in Milan yesterday. CustomWeather Inc. forecast temperatures today of minus 8 degrees Celsius (18 Fahrenheit) in Milan, northern Italy. It may drop to minus 10 Celsius by Feb. 10, according to the data.

Italy, Europe’s third-biggest gas user, imports about 20 percent of its supplies from Russia, the world’s biggest gas exporter and producer. In 2010 Italy used 76.1 billion cubic meters of the fuel, behind only the U.K. and Germany and more than France, according to BP Plc’s Statistical Review of World Energy.

Emergency Measures

Deliveries from Russia are progressively returning to normal, and Italy is tapping as much as 150 million cubic meters a day from storage, Gianni di Giovanni, a Rome-based spokesman for ENI SpA, said on Sky TG24. At current rates, the stockpiles will be depleted in 20 days, he said.

Gas for delivery through the rest of February at the Punto di Scambio Virtuale, Italy’s gas-trading hub, rose 14 percent to 37 euros ($58.48) a megawatt-hour at 2 p.m. Italian time, according to prices from ICAP Plc on Bloomberg. That’s a premium of 30 percent compared with prices in the U.K. for the same period.

Consumption in Italy reached 450 million cubic meters yesterday, a level that requires the activation of emergency measures in line with European Union policies, Deputy Industry Minister Claudio de Vincenti told Sky TG24 yesterday.

Demand today is forecast at 455 million cubic meters, 46 percent more than on this day last year, Snam Rete said. Gas use yesterday reached 461 million cubic meters.

Some industrial customers had supplies interrupted within their contract terms, the ministry said yesterday. Households won’t be affected by the emergency measures, it added.

Non-Russian Supplies

Gas was being delivered at Tarvisio on the Austria-Italy border yesterday evening at a rate of about 85.2 million cubic meters a day, about 18 percent below the requested level according to data from Snam Rete SpA, owner and operator of Italy’s gas-pipeline network. Tarvisio is where Russian gas supplies arrive by pipeline in Italy.

Enel’s oil-fired plants at Livorno and Piombino are already generating, according to a company spokesman who declined to be named in line with company policy.

Gas storage sites in Italy were 59 percent full yesterday, according to data from Gas Infrastructure Europe. That’s the same as the European average.

Deliveries from supplies from other sources, such as North Africa or Northern Europe, were stable or increasing, the ministry said.

Russian Supplies at 89 Percent

Italy asked for 105.7 million cubic meters of gas to be delivered from Russia at Tarvisio today, and is receiving 89 percent of that total, a Snam Rete official said, declining to be named in line with company policy.

“This episode might have implications on the image of Gazprom, but I’m not very concerned about the physical shortage,” Laszlo Varro, head of the International Energy Agency’s gas, coal and power market division, speaking by phone from Beijing today.

European storage is high and the market is working well to get gas where it needs to be, he said. “In an interconnected market every country is a swing supplier,” Varro said.

Gas is arriving in Italy from Libya through the Greenstream pipeline under the Mediterranean Sea at a rate of about 18 million cubic meters a day.

Algeria supplies most of Italy’s gas through the Trans- Mediterranean link from Algeria via Tunisia into Sicily at Mazara del Vallo. About 98 million cubic meters of gas is requested to arrive there today, up from deliveries of 94 million yesterday, according to Snam Rete.

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net

To contact the editor responsible for this story: Raj Rajendran at rrajendran4@bloomberg.net

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