Fossil shortages in midst of Freeze

Italy Gas Situation Critical;EU Coping With Gas Cuts

Fox News,

6 February, 2012

taly said its natural gas supply situation Monday was critical after receiving lower-than-requested gas imports from Russia for nearly a week, but the European Commission said other EU countries are coping with the shortage of fossil fuel.

Gas has grown in importance for European Union energy security because it emits less carbon dioxide compared with coal, and as lawmakers and the general public in some countries prefer other energy sources to atomic power after the Japanese nuclear disaster in Fukushima.

A bitter cold snap, however, has temporarily tightened supplies to parts of Europe as Russian gas giant OAO Gazprom (GAZP.RS) uses more gas than usual to meet Russia's domestic needs. The company ordinarily supplies Europe with around a quarter of its gas needs.

Gas flows from Russia remain lower in Italy, Germany and Romania, but are back to normal levels in other countries, a spokeswoman for the European Commission said Monday. "There is no emergency in Europe," she said.

In Italy, the Industry Ministry committee that monitors the country's gas supply situation said it had decided to allow six power generators to switch to fuel oil from gas, from Monday evening.

The industry committee also decided it will allow energy companies from Tuesday to gradually reduce gas supplies to large companies where such "interruptible" contracts have such a clause, as domestic consumption reached a record high from the bitter cold.

"Yesterday we decided to pass to alert levels after [gas] consumption reached the highest level on record," said Italian Industry Minister Corrado Passera, on the sidelines of an event in Milan.

Italian energy giant Eni SpA (E), which has close ties to Gazprom, said another cold snap is forecast in Russia this week and "we don't know how Gazprom will behave Thursday and Friday," but indicated that the situation is under control until Wednesday, according to Chief Executive Paolo Scaroni in an interview with Radio24.

Italian gas demand over the weekend reached a record high as temperatures dropped below the freezing point. Snow blanketed large parts of the country as the Siberian cold that hit Eastern Europe moved to the peninsula. Rome saw its heaviest snowfall in almost three decades, and schools and public offices in the capital were closed Monday.

Gazprom admitted Saturday that it had cut supplies to Europe by about 10% "for several days" and said it couldn't pump additional gas volumes to Europe, as it would prioritize higher domestic demands amid freezing temperatures. Gazprom had earlier denied cutting exports to Europe below contracted levels, claiming European customers had increased gas demand above contracted levels.

Gazprom's Deputy Chief Executive Alexander Medvedev is expected to make a statement regarding European gas exports later Monday.

Italy has increased gas supplies from North Africa and Northern Europe via Switzerland to offset the lower Russian rates. More than 50% of Italy's electricity is generated from gas.

Italy's industry minister said the country's strategic gas reserves haven't been tapped. Companies are tapping into their stored gas, but people familiar with the matter said the stored capacity is high following a mild winter in previous months.

According to Italian gas grid Snam SpA's (SRG.MI) data on its website at 1500 GMT, Monday, Gazprom's gas supplies to Italy via the Tarvisio entry point were expected to be 21% less than requested.

In France, power grid company Reseau de Transport d'Electricite, or RTE, Monday called on the country's local authorities to help moderate electricity consumption, which should reach a record high later in the day or Tuesday due to the unusually cold weather. RTE is a unit of state-controlled power company Electricite de France SA (EDF.FR).