"Italy currently imports majority of its gas from Russia, Algeria followed by Qatar, Libya and Norway. Italy for some time has been planning to diversify its energy sources and be less reliant on Russian gas. It imported ~23 billion cubic meters of Russian gas in 2018, in 2019 it is still one of the biggest buyers after Germany as Turkey decreased its import of Russian gas. Last year Italy increased its gas imports from Libya. However there exists an uncertainty over Libyan gas due to the ongoing civil war, as it can default anytime. Hence additional gas will help stabilize its demand," he said.
The analyst noted that Azerbaijani gas through TAP will not only diversify Italy’s gas sources but will also provide security against other gas exporters.
"It will also make Italy a regional gas hub for European countries. It will give leverage to Italy to bargain a better gas price from other suppliers, resulting in a gas competitive market. The 8.8 bcm of additional gas will replace pipeline imports from Algeria which we forecast that will decline towards 2030, but could also replace import from Russia in the short-term as export from Azerbaijan is ramping up," he added.
Babele went on to add that Shah Deniz phase 2 field will be providing 10 billion cubic meters of gas via TAP.
"The SGC and the increasing availability of LNG will play an important role in diversification going forward. Turkey which has been among the biggest importer of Russian gas in 2018 (~24 Bcm), reduced its import volumes by roughly 34 percent in the first nine months of 2019 as compared to 2018 due to more gas supplies from Azerbaijan and LNG imports."
Italy will receive 8.8 billion cubic meters of gas via TAP, with supplies expected by late 2020. TAP project is 92 percent complete as of late January.
TAP project, worth 4.5 billion euros, is one of the priority energy projects for the European Union (EU). The project envisages transportation of gas from Azerbaijan's Shah Deniz Stage 2 to the EU countries.
Connecting with the Trans Anatolian Pipeline (TANAP) at the Greek-Turkish border, TAP will cross Northern Greece, Albania and the Adriatic Sea before coming ashore in Southern Italy to connect to the Italian natural gas network.
The project is currently in its construction phase, which started in 2016.
Once built, TAP will offer a direct and cost-effective transportation route opening up the vital Southern Gas Corridor, a 3,500-kilometer long gas value chain stretching from the Caspian Sea to Europe.
TAP shareholders include BP (20 percent), SOCAR (20 percent), Snam S.p.A. (20 percent), Fluxys (19 percent), Enagás (16 percent) and Axpo (5 percent).
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