Eni SpA, Italy’s biggest oil producer, is seeking to renegotiate all of its long-term natural gas contracts after tensions between Russia and the European Union over Ukraine questioned the existing supply mix and forced the continent to look at alternatives.
Eni yesterday signed a final agreement with Statoil ASA on revision of terms of a long-term gas contract, the Italian company said in a statement. The deal means the end of arbitration proceedings initiated by Eni, the company said.
“The agreement with Statoil, which is particularly important considering recent international political developments, is part of Eni’s effort to renegotiate all third-party long-term gas supply contracts, with the target of achieving a competitive portfolio by 1 January 2016,” Eni said. An Eni official, who declined to be identified in line with company policy and confirmed the reference was to the situation in Ukraine, declined to comment on the details of the agreement.
Eni, OAO Gazprom’s biggest buyer, is seeking to diversify its supply sources, with Chief Executive Officer Paolo Scaroni saying on March 20 that Italy could live without Russian gas and has more liberty on the fuel compared with other European nations. The country, which is 29 percent dependent on Russian gas, also buys the fuel by pipeline from North Africa and as liquefied natural gas shipped by tankers. Russia taking control over Ukraine’s Crimea peninsula pushed the EU to review its 30 percent dependence on Russia in its total gas needs and seek alternatives, including options from more LNG to shale gas.
Gazprom and Eni continue to renegotiate their contract and aim to agree on the take-or-pay deal by the end of April, Il Sole 24 Ore reported March 14, citing Scaroni. The negotiations aren’t easy, and while eliminating dependence on Russian gas would be possible, it would require a new long-term plan, Scaroni told the newspaper at the time.
Europe should push for greater integration of pipeline and grid networks in power and gas markets, Marco Alvera, CEO of Eni’s trading and shipping arm, said today at the FT Commodities Global Summit in Lausanne, Switzerland.