LNG

Sometimes you have to wonder whether people have any idea of the effort involved in making it possible for them to turn on the light or the central heating every day. Italy is a country that relies on gas to generate 60 per cent of its electricity, and on imports for 85 per cent gas. It is heavily dependent on Russia and Algeria  – two countries whose continued friendliness cannot necessarily be taken for granted – to continue functioning. So one would think that projects to increase the options for importing gas should be a no-brainer. Certainly that is what the European Commission seemed to think, when it backed the Brindisi LNG terminal being built by BG Group in the "heel" of Italy. In January, it identified the terminal as part of its priority interconnection plan, on which "urgent action" was needed.

Yet on October 5 Italy announced that it had suspended the permit for BG to keep working on the project, pending a fresh environmental impact assessment. The environment ministry put a curt statement to that effect (in Italian) on its website on Friday. That appears to mean a delay of at least three months, maybe more. Not that it matters all that much, of course, as the site has been closed since it was taken over by police as part of an inquiry into corruption allegations in February.

BG is far from being the only company to face problems. Even Eni, the national gas champion, has run into local opposition. This being Italy, of course, the government is not united. Pierluigi Bersani, the economy minister, backs the Brinidisi LNG development. But the strength of the opposition suggests

This at a time when Gazprom’s row with Ukraine over a $1.3bn debt has reawakened fears in all EU countries – Italy above all – about the vulnerability of their gas supplies. There are apparently fierce local objections in Brindisi. People are not opposed to LNG per se; they just don’t want it coming into their city. But with government ministires in Rome apparently prepared to support those objectors, the risk that the lights will go out – as Fulvio Conti, chief executive of Enel, has warned (in Italian again) – grows ever greater.

PetroChina, the listed but state-controlled Chinese energy group, has signed a 15-year, $37bn deal to buy liquefied natural gas from Woodside Petroleum’s planned Browse project in Australia. The deal follows a similar 20-year contract signed a couple of days ago with Royal Dutch Shell for LNG from Chevron’s Gorgon project, also off Australia, in which Shell has a stake. (FT stories may require subscription)
In the past few years – since oil prices started to rise – the main action in China has been in coal; the country has been putting on coal-fired electricity generation capacity at a rate equivalent to a good-sized new power station every week.
The fact that China is now trying to tie up gas supplies, at prices apparently well above what it was prepared to pay in 2002, suggests it has caught on to the prevailing thinking in energy-importing countries in the West: above all it is diversity of supply that fosters security.
It is also evidence of what looks like a looming global shortage of LNG. With the delays hitting projects such as Gassi Touil in Algeria (where the government is kicking out Repsol, the operator), and demand growing at double-digit rates, it looks as though there is not going to be enough LNG to go round.

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