Europe should create common strategic gas reserve: Snam CEO
Italy’s Snam is proposing the creation of a European stored gas reserve to ensure countries have enough gas in the event of a supply emergency, the CEO of Snam, Carlo Malacarne said.
“The idea is to establish a European gas reserve, using a model that could be borrowed from the oil sector, for which member states already have an obligation to maintain a minimum level of reserves,” he told Platts in a written interview.
The plan was “still at an early stage” he said, adding that the European storage sites which would be used to form the common reserve had not yet been identified, although he said “initially they could be located in Italy and Germany.”
The two countries hold some of the biggest gas storage facilities in Europe, accounting for around 16.5 and 22 Bcm respectively, according to Gas Storage Europe.
The setting up of the strategic reserve, as well as its “maintenance and use, should be based on non-discriminatory and transparent rules and mechanisms,” he said, adding that costs arising from the plan should be “shared among the various member states.”
Asked about what storage/injection schedule the strategic storage would follow — given that countries like Italy have a somewhat rigid division between injection season in summer and withdrawal season in winter — he said that would “broadly follow that [schedule] used by each country for the injection season.”
Asked what further steps would need to be taken to implement the reserve, he said “common rules need to be established, in line with what happened in the oil sector following the crisis in the ’70s.”
Such rules “should define the role, involvement and coordination of European infrastructure operators” and institutions, as well as “establishing criteria for determining minimum levels of storage reserves considered necessary to ensure security of supply” for member states, “in particular those of Eastern Europe, which are more vulnerable from a security of supply point of view.”
Further steps would include identifying, possibly through the coordination of Entsog — European network of transmission system operators for gas — what storage sites to use as well considering the construction of new ones, to make available “a total capacity of around 40-70 Bcm, enough to cover consumption during the coldest winter months.”
REVERSE FLOW IN PLACE FROM SUMMER 2018
Malacarne said of the reverse-flow project Snam is developing with Belgian grid operator Fluxys that Fluxys recently took the final investment decision for making flows on the Transitgas and Tenp pipeline bidirectional.
“From the end of summer 2018, it will be possible to transport gas through Switzerland from Italy to Germany and France” as well as having bi-directional flows between Germany and France, he said.
The two companies will now assess how to commercialize the capacity, “also in the light of the implementation of the CAM network code” he said, adding that “a precise schedule for such decision is not yet available.”
The CAM network code is aimed at harmonizing capacity allocation procedures across European markets.
Meanwhile, the Italian Punto di Scambio Virtuale gas market, managed by Snam, is to join PEGAS — the natural gas platform jointly established by the European Energy Exchange and Powernext — from March 26.
PEGAS will offer financially settled futures contracts for the PSV, as well as local spreads between the existing physical products on the Dutch TTF market area and these new financially settled futures contracts on the PSV.
Asked about how he expected the market to be affected by the move, he said this would be “a further instrument for increasing liquidity” in the market and “promote the alignment of Italian and European prices.”
He added with 524 million MWh traded in 2014 (up 85.9% year on year), the PSV now represents the fifth largest European gas hub.
In July 2014 State Grid Corporation of China acquired a 35% stake in CDP Reti, the company holding 30% of Snam, and which is controlled by state-owned Cassa Depositi e Prestiti.
Asked whether Snam is now looking at projects in the Far East, he said although “China doesn’t represent a priority for us and is not part of our industrial plan for the next four years,” at the same time it’s important for Snam to “follow closely the development of the infrastructure in the country, in particular that related to gas transportation.” He added that it was estimated that in the “next 15 years there will be 80,000 km [49,600 miles] of gas pipelines to build” and “State Grid of China would certainty able to provide significant support” to Snam should opportunities arise.