African Reserves

The energy crisis creates a new European order: a strong Italy and a sick Germany

MILAN/FRANKFURT, Sept 30 (Reuters) – In the weeks since Russia invaded Ukraine on February 24, Claudio Descalzi, CEO of Italian energy giant Eni (ENI.MI), has is embarked on a whirlwind of journeys to gas suppliers in Africa.

The visits included meetings with officials in Algeria in February as well as talks in Angola, Egypt and the Republic of Congo in March, with Descalzi often accompanied by senior Roman officials, according to company and government statements.

Eni and state-controlled Italy have been able to leverage existing supply relationships with these countries to obtain additional gas to replace much of the volumes received from its main supplier, Russia.

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It’s a nimble shift that many European countries have been unable to accomplish as Vladimir Putin’s war tilts the continent into an alternate reality.

Take Germany. An economic powerhouse and long synonymous with careful planning, it was caught off guard. It is on the verge of recession, its industry is preparing for gas and electricity rationing and it has just nationalized a major electricity company.

Italy, a country accustomed to economic crises, seems relatively resilient. He has secured extra supplies and is confident he won’t need to ration gas, with his government hailing the country as “Europe’s best” when it comes to energy security.

“The appreciation that Descalzi enjoys in several African countries is for sure a competitive advantage,” said Alberto Clò, Italy’s former industry minister and former Eni board member, referring to difficulties in signing contracts. agreements in times of supply crisis.

Indeed, the two countries find themselves in contrasting circumstances as a serious energy crisis weighs unequally on a continent where dependence on Russian gas is highly variable.

Much of the region is facing a winter supply crisis, including Germany, Hungary and Austria. The least affected countries are France, Sweden and Britain, which do not traditionally rely on Russia, as well as Italy.

Martijn Murphy, an oil and gas specialist at research firm Wood Mackenzie, said that although Italy has long counted Russia as its biggest supplier of gas, its greater diversity of suppliers and long-standing ties with Africa meant that it was better placed to resist a Russian stoppage. offer than many others.

“Eni has very close ties with all the countries with which it operates in North Africa and is present in all of them: Algeria, Tunisia, Libya, Egypt and in most of these countries it is the largest upstream investor and producer. of an international oil company.

The power crisis caused by the war forced governments to face the risks of overdependence on a dominant supplier or region. It echoes the energy crisis of the 1970s that led the West to rethink its dependence on Middle Eastern oil, a shift that spurred global exploration and the search for alternative suppliers such as Venezuela and Mexico.

The Italian government declined to comment. Germany’s economy ministry says it wants to move away from Russian gas imports as quickly as possible and diversify its supplies, citing early steps in this direction, such as leasing five floating terminals for natural gas liquefied (LNG). Germany currently has no LNG terminals, while Italy has three in operation and recently purchased two more.


Italy consumed 29 billion cubic meters (bcm) of Russian gas last year, which represents around 40% of its imports. It is gradually replacing around 10.5 billion cubic meters with increased imports from other countries starting this winter, according to Eni.

Most of the additional gas will come from Algeria, which said on September 21 that it would increase total deliveries to Italy by almost 20% to 25.2 bcm this year. This means that it will become Italy’s leading supplier, supplying around 35% of imports; Russia’s share has meanwhile fallen to very low levels, Descalzi said this week.

From spring 2023, an increasing flow of LNG will start arriving from countries such as Egypt, Qatar, Congo, Nigeria and Angola, allowing Italy to replace an additional 4 billion cubic meters of Russian gas , said Eni.

Germany, whose 58 billion m3 of Russian gas imported last year represented 58% of consumption, has seen its supplies via the Nord Stream 1 gas pipeline reduced since June and stopped in August.

Unable to secure sufficient long-term replacement supplies from other countries and lacking a major domestic oil and gas company producing overseas, it was forced to go on-site, or spot, in the market where she had to pay about eight times the prices seen a year ago for replacement gas.

Factors beyond human control can shape energy security: Germany does not benefit from Italy’s proximity to North Africa, for example, or from the North Sea riches of Britain and Norway. It has no major oil or gas reserves.

Nevertheless, German officials and leaders have made miscalculations in recent years, especially after Russia’s annexation of Ukraine’s Crimean peninsula, suggesting that the current crisis could have played out differently.

In 2006, Italy was the biggest mover towards Russian gas, with Eni – the country’s main gas importer – securing at the time the biggest gas deal ever by a European company with the gas giant. energy controlled by Moscow Gazprom (GAZP.MM).

But over the past eight years, the two countries have diverged: Germany has doubled its share of Russian gas and has become increasingly dependent while Italy has sought to hedge.

Italy began to chart a different course in 2014 when a new government replaced that of Silvio Berlusconi, who was a longtime friend of Putin, and Descalzi took over as head of Eni, according to three sources familiar with the matter. country’s energy strategy.

Descalzi, an exploration and production specialist who had overseen projects in places like Libya, Nigeria and Congo, focused on what he knew best, a source said: exploring l ‘Africa.

A major success came in Egypt in 2015, when Eni discovered the largest gas field in the Mediterranean Sea, Zohr. While Descalzi was pushing Eni to speed up projects, the source added, Eni was able to start production at Zohr in less than two and a half years, a relatively rapid development in the industry.

In Algeria, where Eni has been present since 1981, the company reached an agreement in 2019 to renew gas imports until 2027.


Russia’s annexation of Crimea in 2014 and subsequent Western sanctions were a watershed moment.

Rome withdrew its support for Gazprom’s $40 billion South Stream project – which was to transport gas from Russia to Hungary, Austria and Italy while bypassing Ukraine – also in response to the sanctions. South Stream was abandoned by Eni later that year, before being mothballed by Moscow.

Italy has instead turned to building the smaller trans-Adriatic pipeline from Azerbaijan via Greece and Albania.

Germany did not, however, reduce its exposure to Russia.

“Europe and Russia have built an energy partnership over four decades, and there has not been a single day in that time when gas has been used as a strategic weapon against the West,” said Johannes Teyssen, then CEO of E.ON (EONGn .DE), said in 2014 following the annexation.

In addition, an agreement was reached in 2015 between Gazprom and companies such as German companies E.ON and Wintershall (WINT.UL) to form a consortium to build the Nord Stream 2 gas pipeline.

Germany was once again caught off guard.

A day before Moscow invaded Ukraine, Klaus-Dieter Maubach, CEO of Uniper (UN01.DE), Germany’s largest importer of Russian gas, described Gazprom as a trustworthy supplier.

He has since changed his mind.

Seven months later, Uniper is preparing to sue Gazprom for damages over supply cuts and was bailed out 29 billion euros ($28 billion) by the German government, which in September agreed to nationalize the company.

Germany aims to fully replace Russian gas by mid-2024, although some utilities – including top power producer RWE (RWEG.DE) – believe it could take longer than that, since alternative sources are rare and the volumes difficult to obtain.

All agree that it will be an expensive undertaking.

“We have relied too long and too heavily on energy supplies from Russia,” German Chancellor Olaf Scholz said in June. “The old equation that Russia is a reliable economic partner even in times of crisis no longer applies.”

($1 = 1.0218 euros)

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Reporting by Francesca Landini in Milan and Christoph Steitz in Frankfurt; Assembly Pravin Char

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