Eni Forces Sonatrach Gas Sales Concessions

Italy offtake hits 4-year high with end of oil-linkage.

Algeria’s pipeline exports to Italy through the Transmed pipeline averaged 2.6mn cfd in the first two weeks of December, their highest level since January 2013, after state-owned Sonatrach and Italy’s Eni renegotiated a one year contract starting in October 2016. Flows in October were 1.81bn cfd – more than double those 12 months earlier – before a further rise to 2.16bn cfd in November (see chart).

A brief Eni statement on 13 December said that the two companies reached an agreement “for commercial terms in accordance with the relevant gas market.” Speaking to investors in New York the same day Eni CEO Claudio Descalzi shed light on these terms. The contract with Sonatrach has been “aligned to our Italian hub,” he says, referring to Italy’s PSV price. “That is a very important result that will enable us to get a breakeven on our Gas and Power business, as we promised in 2017,” he adds. The renegotiated agreement covers almost 20% of the gas imported into Italy and is another step in Eni’s adjustment of its long-term gas supply contracts and optimizing costs in its gas and power unit, the company says. The deal forms part of a Framework Agreement signed by Eni and Sonatrach on 25 November, demonstrating a strong cooperation between the two companies, Eni says. This includes plans to cooperate in renewables projects in the North African country. (CONTINUED - 553 WORDS)