Caspian Report - Issue: 07 - Spring 2014
AntonIo SIleo 84 Power generation of electricity significantly affects Italian natural gas consumption. umes bounce back to 2005 levels, the overall volatility of the market will change. In fact, domestic use is strictly related to climatic and seasonal conditions (i.e. winter consumption is much higher than summer consumption) and from year to year (for example, in the event of a particular cold winter). The second consequence raises security issues: given the EU regulation on security of supply 4 and its implementation within national law, domestic consumers are protected in case of supply shortages. 5 This protection guarantees supplies to consumers in case of: 1) extreme temperatures during a 7-day peak period occurring with a statistical probability of once in 20 years; 2) any period of at least 30 days of exceptionally high gas demand, occurring with a statistical probability of once in 20 years; and 3) for a period of at least 30 days in case of the disruption of the single largest gas infrastructure under average winter conditions. An increasing impact of domestic consumption also increases the share of protected consumers, and therefore of the supply that must be secured to the expenses of other uses, such as power generation. Given the impact of thermoelectric power generation on total power generation in Italy, the European provisions on supply security raise serious concerns in case of a winter disruption, when electricity demand is high, photovoltaic produc- 4. Regulation n. 994/2010. 5. With other civil consumers, whose total consumption is less than 50,000 cubic meters per year.
tion is negligible and priority is given to domestic consumers. 3. Security issues: lessons from the recent past The Italian gas system has significant experience of critical and unexpected situations. Two exceptional events have taken place in recent years: the interruption of the Greenstream flow due to the outbreak of the conflict in Libya at the end of February 2011, and the 6-month shutdown of the Transitgas pipeline (which connects Italy to Northern Europe), from July to December 2010, because of a landslide in Switzerland. In the attempt of realizing a crisis infrastructural equipment, which can face the interruption of a pipeline or the consequences of an exceptional cold snap, storage infrastructures stand as key-asset for the system. In the current system, those facilities play a crucial role in satisfying consumption modulation, because they ensure the flexibility required for the execution of administration contracts to the selling companies. Good storage capacity has also been proven to be a basic precondition for the creation of a liquid market, both in the gas and electricity sector, increasing arbitrage opportunities among markets in different countries. Such liquidity is currently not a feature of the Italian system, that cannot rely on satisfying networks neither at the internal nor at the European. To further illustrate this point, it is useful to consider a spe- cific case: the emergency situation that arose in February 2012. On February 1 st 2012, Gazprom did not appear to be able to meet the increased supply demand its European clients. In the Italian context, this imbalance was reflected in a discrepancy between requirements and transits of 12.3% at the entry point of Tarvisio. The gap increased up to 24.2% the following day, and up to 30% by February 3 rd . Despite the geopolitical tensions arising from polarised views of Ukraine’s alleged violation of the gas agreements - having withdrawn more gas than its contract allowed for - the main factor in the 2012 crisis was simply the cold snap which struck Europe, Turkey and indeed Russia itself. The withdrawing of stored volumes has thus covered, once again, 6 the Russian shortage. Friday 3 rd February, 32 mcm were withdrawn from storage, in order to meet an unusual high demand: 414.7 mcm daily. The following week, due to the extreme cold and intense industrial activity, the demand did not shrink, reaching record highs on February 6 th and February 7 th . Consumption on February 7 th was 465.9 mcm, setting an absolute record of network intakes. A comparison with the comparable Tuesday in 2011 illustrates the exceptional nature of this peak (Figure 2). As a result, gas withdrawals in the industrial sector in 2010 were heav- 85 CASPIAN REPORT, SPRING 2014 6. Similar extraordinary condition where met in 2005 and 2009.
- Page 36 and 37: Aura Sabadus 34 Russian-backed riva
- Page 38 and 39: Aura Sabadus 36 The criticism has g
- Page 40 and 41: Aura Sabadus 38 other large rival t
- Page 42 and 43: Aura Sabadus 40 player by selling v
- Page 44 and 45: and possibly further to Europe, alt
- Page 46 and 47: Aura Sabadus 44 The Southern Gas Co
- Page 48 and 49: Davide Tabarelli 46 Environmental e
- Page 50 and 51: Davide Tabarelli 48 evaluate potent
- Page 52 and 53: View of the old town Ostuni, Puglia
- Page 54 and 55: Davide Tabarelli 52 of some 200 mil
- Page 56 and 57: Iran Nuclear Negotiations and Turke
- Page 58 and 59: Mehmet AkIf Okur 56 posal stated th
- Page 60 and 61: Iranian President Hassan Rouhani an
- Page 62 and 63: Mehmet AkIf Okur 60 The steps that
- Page 64 and 65: Mehmet AkIf Okur 62 It is possible
- Page 66 and 67: Frank Umbach 64 Strategic Perspecti
- Page 68 and 69: Frank Umbach 66 Many of the shale g
- Page 70 and 71: Frank Umbach 68 are considerably hi
- Page 72 and 73: Frank Umbach 70 The UK government i
- Page 74 and 75: With Russia’s President Vladimir
- Page 76 and 77: Frank Umbach 74 During the last thr
- Page 78 and 79: Frank Umbach 76 approved by the gov
- Page 80 and 81: Shale gas drilling rig. Frank Umbac
- Page 82 and 83: THE IMPORTANCE OF TAP FOR ITALY SOM
- Page 84 and 85: AntonIo SIleo 82 the end of 2011, g
- Page 88 and 89: ily limited because of the emergenc
- Page 90 and 91: AntonIo SIleo 88 ductant chemical r
- Page 92 and 93: AntonIo SIleo 90 emerge as a signif
- Page 94 and 95: Radu Dudau 92 Romania’s Energy St
- Page 96 and 97: Radu Dudau 94 countries pay for Rus
- Page 98 and 99: Radu Dudau 96 This industry, howeve
- Page 100 and 101: Radu Dudau 98 de facto monopolies i
- Page 102 and 103: Radu Dudau 100 In October 2013, the
- Page 104 and 105: Radu Dudau 102 In spite of the ling
- Page 106 and 107: caspian
- Page 108 and 109: Why World Oil Prices Should Be High
- Page 110 and 111: Luay Al-Khatteeb 108 for $1 of reve
- Page 112 and 113: emın akhundzada 110 Turkey as an E
- Page 114 and 115: emın akhundzada 112 markets. Given
- Page 116 and 117: emın akhundzada 114 First, it shou
- Page 118 and 119: FatIh Ozbay 116 Discussions about V
- Page 120 and 121: FatIh Ozbay 118 The Black Sea is a
- Page 122 and 123: FatIh Ozbay 120 these two countries
- Page 124 and 125: FatIh Ozbay 122 Montreux is quite s
- Page 126 and 127: MUbarIz Hasanov 124 Some Remarks on
- Page 128 and 129: Turkey will be USD 37 billion highe
tion is negligible and priority is given<br />
to domestic consumers.<br />
3. Security issues: lessons<br />
from the recent past<br />
The Italian gas system has significant<br />
experience of critical and unexpected<br />
situations. Two exceptional events<br />
have taken place in recent years: the<br />
interruption of the Greenstream flow<br />
due to the outbreak of the conflict in<br />
Libya at the end of February 2011,<br />
and the 6-month shutdown of the<br />
Transitgas pipeline (which connects<br />
Italy to Northern Europe), from July<br />
to December 2010, because of a landslide<br />
in Switzerland.<br />
In the attempt of realizing a crisis infrastructural<br />
equipment, which can<br />
face the interruption of a pipeline or<br />
the consequences of an exceptional<br />
cold snap, storage infrastructures<br />
stand as key-asset for the system.<br />
In the current system, those facilities<br />
play a crucial role in satisfying<br />
consumption modulation, because<br />
they ensure the flexibility required<br />
for the execution of administration<br />
contracts to the selling companies.<br />
Good storage capacity has also been<br />
proven to be a basic precondition<br />
for the creation of a liquid market,<br />
both in the gas and electricity sector,<br />
increasing arbitrage opportunities<br />
among markets in different countries.<br />
Such liquidity is currently not<br />
a feature of the Italian system, that<br />
cannot rely on satisfying networks<br />
neither at the internal nor at the<br />
European. To further illustrate this<br />
point, it is useful to consider a spe-<br />
cific case: the emergency situation<br />
that arose in February 2012.<br />
On February 1 st 2012, Gazprom did<br />
not appear to be able to meet the<br />
increased supply demand its European<br />
clients. In the Italian context,<br />
this imbalance was reflected in a<br />
discrepancy between requirements<br />
and transits of 12.3% at the entry<br />
point of Tarvisio. The gap increased<br />
up to 24.2% the following day, and<br />
up to 30% by February 3 rd . Despite<br />
the geopolitical tensions arising<br />
from polarised views of Ukraine’s<br />
alleged violation of the gas agreements<br />
- having withdrawn more gas<br />
than its contract allowed for - the<br />
main factor in the 2012 crisis was<br />
simply the cold snap which struck<br />
Europe, Turkey and indeed Russia<br />
itself.<br />
The withdrawing of stored volumes<br />
has thus covered, once again, 6 the<br />
Russian shortage. Friday 3 rd February,<br />
32 mcm were withdrawn from<br />
storage, in order to meet an unusual<br />
high demand: 414.7 mcm daily. The<br />
following week, due to the extreme<br />
cold and intense industrial activity,<br />
the demand did not shrink, reaching<br />
record highs on February 6 th and<br />
February 7 th . Consumption on February<br />
7 th was 465.9 mcm, setting an<br />
absolute record of network intakes.<br />
A comparison with the comparable<br />
Tuesday in 2011 illustrates the exceptional<br />
nature of this peak (Figure<br />
2).<br />
As a result, gas withdrawals in the<br />
industrial sector in 2010 were heav-<br />
85<br />
CASPIAN REPORT, SPRING <strong>2014</strong><br />
6.<br />
Similar extraordinary condition where met in 2005 and 2009.