Italy's Edison to replace pipeline gas with LNG for "flexibility"
Italian gas and electric utility Edison plans to replace some gas volumes from pipeline contracts with liquefied natural gas to gain more flexibility in managing demand, its CEO said on Wednesday.
The company earlier announced a 15-year agreement with Shell to purchase about 0.7 million tonnes per year of US LNG starting in 2028.
European companies are stepping up LNG purchases to gain flexibility so they can resell cargoes to other markets when demand is low. Edison said this approach would help it to adapt to uncertain consumption trends in Italy and across Europe.
Speaking at the Gastech conference, Edison CEO Nicola Monti said the group had two pipeline contracts that would expire in the next two years - one from Algeria for about one billion cubic metres a year and another for around 4.4 bcm, partly from Libya.
"We will probably reduce the overall volumes from these two contracts, with the intention of replacing those volumes with more LNG," Monti told Reuters, adding that the Shell contract was part of this strategy.
He said the best strategy for the company is to be more flexible with LNG, "able to either move that gas to the Italian or European market, or to divert volumes to emerging economies".
The agreement signed with Shell follows another long-term gas contract with US group Venture Global LNG.
Since Venture Global started shipping gas last April, deliveries have been regular, Monti said.
But Edison has been pursuing an arbitration case against Venture Global for allegedly failing to start delivering LNG shipments in late 2022, when Europe was grappling with Russia's invasion of Ukraine. Monti said Edison expected the case to be decided by year-end.
Last month, Venture Global prevailed in a similar complaint from Shell. "We were very, very surprised with the result of Shell's arbitration," Monti said. "Our arbitration case is different, because the court is different."
Monti also said that Edison's contract with Venture Global was not same of Shell's.
Other companies, including BP and Galp, have also filed claims against Venture Global, accusing it of profiting from the sale of LNG on the spot market instead of providing them with contracted cargoes from the Calcasieu Pass export facility in Louisiana.
"Without the commitment of all the eight foundation customers and without the strength of our balance sheet Venture Global would not have been able to finance and start the project," Edison CEO Monti said.
Venture Global has denied the allegations and said in August that it expected to win all the pending arbitration cases.
The CEO of the US operator, Michael Sabel, told Reuters on Tuesday that, "the contracts are all the same, the facts around the facility are all the same".
(Reporting by Francesca Landini and Giancarlo Navach Additional reporting by Marwa Rashad and Emily Chow Editing by Jan Harvey and David Goodman)
