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Italy fears costlier gas due to Tunisia change

Italy is closely monitoring the volatile political situation in Tunisia, seeing a risk of paying higher gas transit prices for its imports from Algeria, two sources told Reuters on Wednesday.

About a third of gas imports to Italy comes from Algeria via Tunisia. Gas transit rights for the Transtunisian Pipeline Company (TTPC) owned by Italy’s oil and gas major Eni have been set at a very low level, an Italian government source said on condition of anonymity.

But Tunisia’s new government may want to raise stakes triggering a situation similar to gas rows between Russia and Ukraine which cut around a fifth of Europe’s gas supplies in winter in 2009, the source said.

“Tunisia could ask to revise upwards the level of rights … The government and Eni are monitoring the situation,” the source said.

However, Eni’s Chief Executive Paolo Scaroni said separately on Wednesday he saw no threat to the group operations in North Africa at present.

“We are seeing no problems so far in Libya or Algeria or Egypt or Tunisia, » Scaroni said in a conference call with analysts after the company’s results.

Another source familiar with the situation said Tunisia could ask to raise gas transit rights that are paid in gas, because gas prices have fallen recently.

TTPC runs across the Tunisian territory for about 370 km from the Oued es Saf-Saf region, at the Algerian border, to the Cap Bon point, on the Mediterranean coast, where it is connected with the submarine Transmediterranean Pipeline Company (TMPC) pipeline.

“It’s especially southern Europe that’s exposed to a supply halt from Algeria and Libya,” said , on the other side Thina Saltvedt, an analyst at Nordea Markets in Oslo quoted by Bloomberg. “As Europe’s third-largest gas supplier, unrest in Algeria would especially put southern Europe’s security of supply to the test.”

Algeria and Libya combined export about 70 billion cubic meters of gas, or about 15 percent of the EU’s annual consumption. The two members of the Organization for Petroleum Exporting Countries also pump a combined 2.8 million barrels a day of crude, according to data compiled by Bloomberg.

Egypt produces about 3 percent of the world’s LNG from two export plants at Gas Natural SDG SA’s Damietta and BG’s Idku LNG facilities, according to Goldman Sachs Group Inc. and Energy Intelligence Group’s World LNG Review.

“Any supply disruption will certainly impact the balance of the European gas market, potentially putting upward pressure on natural gas prices,” Bank of America Merrill Lynch analysts including Alejandro Demichelis said in a report this week.

The month-ahead gas for delivery at the Dutch Title Transfer Facility has slipped 14 percent this year to about 21.15 euros a megawatt-hour. The TTF is the most liquid mainland European gas hub. The equivalent U.K. gas contract, the most traded market in Europe, has fallen 14 percent this year.

So far, there has been little disruption in supplies to Italy from Algeria via the Transmed pipeline from Tunisia. The link flowed at a rate of about 87 million cubic meters a day on Jan. 31, according to Snam Rete Gas SpA, Italy’s pipeline operator. Algeria also ships through the Maghreb Europe pipeline to Spain, while Libya sends fuel through a link to Sicily. Algeria may also open the Medgaz pipeline to Spain this month.

“It’s important to emphasize that even if the problems spread to one of these countries it is not necessarily the case that energy supplies would be disrupted,” Goldman analysts led by Jeffrey Currie in London said in a weekly note on Jan. 31. “History has shown that energy can still flow even under very adverse political conditions.”

No Impact

The unrest in Tunisia and Egypt has “no impact on our business activities at the moment,” Michaela Huber, a spokeswoman for OMV in Vienna, said by phone on Jan. 31. She declined to comment on potential developments.

In Egypt, BG and Statoil halted drilling as a sixth day of protests began to take a toll on the industry. Apache Corp., which got about a third of its production revenue from Egypt in 2009, said it shut its Cairo offices. Royal Dutch Shell Plc and Transocean Inc. also closed offices. BP, the largest foreign investor in Egypt, made plans to evacuate the families of expatriate workers.

BP is also the biggest investor in Algeria, according to its website. The company is seeking to raise money to pay for the cleanup in the Gulf of Mexico after the Macondo spill, and Algeria’s government said last month it’s examining the possibility that assets in the country may be part of that sale.

Source: Reuters & Bloomberg

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