Italy to sign deal in Algeria to increase gas imports, ease Russia gas fix

Italy's Prime Minister Mario Draghi will visit Algeria on Monday to sign an agreement to ramp up gas imports, two sources said, as Rome steps up efforts to tap alternative flows following Russia's invasion of Ukraine.

Draghi will travel with a delegation that is expected to include the head of Italian energy group Eni, Foreign Minister Luigi Di Maio and energy transition minister Roberto Cingolani, a government source said.

Italy, which sources about 40% of its gas imports from Russia, has been scrambling to diversify its energy supply mix as the conflict in Ukraine escalates.

Earlier this week Cingolani said Italy was talking to seven countries to secure more gas with some talks "in a very advanced stage".

Di Maio and Eni Chief Executive Claudio Descalzi have both visited Algeria in recent weeks to discuss strengthening energy ties.

Algeria is Italy's second-biggest gas supplier and the Transmed pipeline has been pumping Algerian gas to Italian shores since 1983. It has a daily capacity of more than 110 million cubic metres but currently transports less than 60 mcm.

Rising domestic consumption, under-investment and political instability, including the closure of a pipeline to Spain over a dispute with Morocco, have capped Algerian exports.

But last year Italian imports rose 76% to 21.2 billion cubic metres (bcm) - 29% of overall flows. Rome has said it is looking to secure 9 bcm more from the North African country.

"Draghi will sign the institutional agreement between the countries and then Eni and Sonatrach will complete the technical aspects," the source said.

The source said the agreement would also include co-investments in renewable energy projects.

State-owned Algerian oil and gas company Sonatrach has been in discussion with state-controlled Eni over how to increase gas supply to Italy in the short and medium term.

Eni, which holds long-term gas contracts with Sonatrach, announced a significant discovery in the Algerian desert in March with around 140 million barrels of oil in place.

But doubt has been cast on how far capacity can be ramped up short term.

"Production can be raised fast using infill techniques to enhance output at wells already producing and fields not yet producing can be fast-tracked," a second source said. 

(Reuters)