Italy bets on Azerbaijan

By Asif Aydinli

In recent years, Azerbaijan has increasingly played a significant role in the European energy market, particularly regarding natural gas supplies to Italy. Italian energy companies have noticeably increased their purchases of Azerbaijani gas, strengthening ties between the two countries and enhancing Italy's energy security. According to Eurostat, the European Statistical Agency, the volume of gas imported from Azerbaijan to Italy in May 2024 was 488 million cubic meters. This is 10.5% more than in May 2023 when the import volume was 441.5 million cubic meters. This growth reflects Italy's steady demand for Azerbaijani gas and highlights its importance in the Italian energy balance.

Interestingly, despite the increase in import volumes, the cost of gas from Azerbaijan for Italy has decreased. In May 2023, Italy paid 366 million euros for gas, while in May 2024, this amount decreased to 276 million euros. This 25% reduction in cost is attributed to global changes in the energy market, including a drop in gas prices and changes in contract terms.

Italy has long sought to diversify its energy supply sources to reduce its dependence on Russia. In 2022, the Italian energy company Eni announced plans to completely phase out Russian gas by 2025. These plans are supported by statistics: in 2021, Russia supplied Italy with 18.4 billion cubic meters of gas, making it the third-largest supplier to Europe after Germany and Turkey. However, the share of Russian gas in Italy's energy balance decreased from 38.2% in 2021 to 15% in 2023.

Algeria also plays an important role in Italy's energy policy. In 2023, the share of Algerian gas in Italy's energy balance was 36%, making it the country's main supplier. Replacing Russia with Algeria as the main gas supplier was a strategic move that began in 2022 and led to a gradual reduction in the share of Russian gas.

Despite successes in diversifying supplies, Italy still faces challenges. In early 2024, Eni's CEO Claudio Descalzi acknowledged that the country had not fully compensated for the shortage of Russian gas. Domestic gas production covers only 4% of Italy's needs, and increasing it requires significant investments and time.

To improve the situation, Italy is actively working on new projects and investments. In 2023, Eni and Libya's National Oil Corporation signed an agreement for joint gas field development worth $8 billion. This project, set to start in 2026, will increase gas supplies from Libya from 2 to 9 billion cubic meters per year.

Italy is also betting on the Southern Gas Corridor (SGC), through which Azerbaijani gas is transported to Europe. In 2023, Italy received 9.988 billion cubic meters of gas through the Trans Adriatic Pipeline (TAP) , the European part of the SGC. In 2024, 9.6 billion cubic meters are expected to be delivered, making TAP a key element in Italy's energy strategy.

Azerbaijan aims to increase gas supplies to Europe. Out of 37.9 billion cubic meters of gas supplied to Europe, over 30 billion cubic meters were transported to Italy.

Azerbaijan's President Ilham Aliyev has expressed intentions to increase gas exports, as current supplies to Italy amount to 9 billion cubic meters, and future demand could reach 20 billion.

Italy, interested in expanding cooperation with Azerbaijan, has initiated discussions on the TAP-2 project. Negotiations focus on the technical feasibility of expansion and gas reserve availability. Azerbaijan's confirmed natural gas reserves are 2.6 trillion cubic meters, offering great prospects for future investments and supply increases.

Overall, Azerbaijan has established itself as a reliable partner for Italy in the realm of gas supplies, playing a crucial role in enhancing the stability and resilience of the European energy market. This partnership reflects a broader strategic shift in Europe towards diversifying energy sources and reducing dependence on traditional suppliers like Russia. By strengthening its ties with Azerbaijan, Italy not only secures a more stable energy future but also aligns with the European Union's energy diversification goals, aimed at creating a more competitive and sustainable energy landscape.

The importance of this partnership is underscored by the growing demand for clean and reliable energy sources in Europe, as countries strive to meet climate targets and transition towards greener energy solutions. Azerbaijan's rich natural gas reserves and commitment to expanding its export capacity make it an attractive partner for Italy, which is actively seeking to ensure a consistent and diversified energy supply.

News.Az