Boston, MA -- (SBWIRE) -- 08/27/2012 -- BMI View: Aside from the country's well-publicised economic woes, Italy is at a crossroads in terms of energy market development. The public is rejecting state efforts to revive its nuclear strategy, leaving the way clear for gas volumes to rise steadily higher - forcing the import bill to keep pace. Domestic oil and gas volumes are significant but under threat, while Italy's refining system will continue to absorb cash but offer little in the way of returns - as evidenced by Eni's decision to reduce throughput at its Gela complex.

The main trends and developments we highlight in Italy's Oil and Gas sector are:

- Italian oil company Eni announced in April 2012 that it was to implement a temporary and partial stoppage at its Gela Refinery in Sicily. Gela will continue to refine crude sourced domestically, but will halt the refining of foreign crude. In its press release, Eni attributed this decision to 'a significant contraction in demand for petroleum products and the surplus of refining capacity', which led to a 'collapse' in refining margins. This stoppage will last for 12 months and Eni plans to resume normal operations at Gela in April 2013. The Gela refinery has a capacity of 100,000 barrels per day (b/d).
- Gas use in power generation is the key to demand growth and consumption looks set to reach 86.6bn cubic metres (bcm) by 2016. Imports are likely to have reached at least 80bcm by that time. By 2021, the country is set to be a net importer of more than 92bcm per annum, potentially costing some US$42bn.
- Snam Rete Gas, the Italian gas distribution network, may be either fully or partly spun off from majority owner Eni, as a result of new liberalisation measures introduced by the Italian government. According to a report in the Financial Times newspaper, citing Italian sources, a spin-off of Eni's EUR5.9bn stake in Snam would create 'industrial advantages' - granting the energy network freedom from antitrust limits. It could also allow Snam to buy stakes in other European operators.
- Italian oil consumption has fallen steadily since 1999. There is scope for very modest annual gains over the next several years, although the lack of economic growth could mean this scenario is overly optimistic. By 2016, oil consumption could hit 1.48mn b/d, climbing to a possible 1.55mn b/d by 2021.
- Italy produced around 156,000b/d of crude oil and gas liquids in 2012. The 500mn barrels (bbl) Val d'Agri oil complex can potentially supply 120,000b/d of light oil, plus heavy oil volumes from the Tempa Rossa field. A near-term rise in domestic oil production is therefore expected. We are now assuming oil and liquids production of 216,000b/d in 2013. Oil imports are set to reach 1.27mn b/d by 2016, rising to 1.37mn b/d by 2021.

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