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Italian consumers warned of looming energy shortfall

December 3, 2007

Financial Times By Guy Dinmore in Rome December 3 2007

Italians could shiver through a cold, dark winter this year thanks to a shambolic bureaucracy and confused decision-making processes that have blocked vital development of energy infrastructure, according to Fulvio Conti, head of Enel, the country’s largest utility.

“Watch out. We are in danger,” warned Mr Conti in an interview, producing figures that showed how close Italy got to pulling the plug on consumers when gas consumption hit a record, reaching the limit of capacity on January 26, 2006.

That day Italy used 420m cubic metres of gas. Russia, Algeria, Libya and the Netherlands provided the maximum possible of 230m, some 170m were taken from storage and 20m from local production. “We made it barely,” he said, explaining how domestic heating and industry were cut back and some power stations were switched from gas to fuel oil.

But nearly two years later Italy, which relies heavily on gas for electricity generation, is actually in a worse situation. Capacity of foreign and domestic supplies remains the same but, because of what Mr Conti called a “bureaucratic shambles between ministries”, storage capacity is less.

“How can a G-8 country not resolve this”? he asked. As a result, Italy is at the mercy of the weather, having been saved last winter by unusually mild temperatures. Mr Conti said he thought he could keep the lights on, but warned about heating. Blocked on several fronts at home, it is not surprising that Enel is expanding its markets abroad.

Mr Conti was speaking to the FT before he signed in Nice last Friday a deal with France’s EDF that gives Enel access to France’s nuclear market. Italy banned further development of nuclear energy in a referendum in 1987 and imports electricity produced by French nuclear plants.

Describing how Enel has tried to build a regasification plant, to process imported liquefied gas, since 1992, Mr Conti blamed Italy’s constitutional system that has produced weak central governments and layers of federal bureaucracy going down through regions, provinces and local authorities.

“A fragmentation of responsibility calls for no responsibility at all, which calls for no initiatives, which is the illness of this country,” he said. Some 18 months ago Enel abandoned a project to build a regasification plant with BG of the UK in Brindisi because of opposition from local authorities and environmentalists. BG is pressing ahead but Mr Conti believes the project is “very remote”.

“Every single local municipality has the final word. It is a recipe for disaster,” he said. Ministers admit the system needs reforming. The 2008 budget going through parliament contains streamlined provisions for regasifiers.

Qatar has also come up against Italian bureaucracy which has delayed construction of the world’s first floating gas terminal, Abdullah bin Hamad al-Attiyah, deputy prime minister, told the FT on a visit to Rome. After assurances from Romano Prodi, the Italian prime minister, and Pierluigi Bersani, minister for development, Mr al-Attiyah said he hoped the Adriatic terminal would be operational in 2009.

Exxon Mobil and Italy’s Edison are also partners. Other future projects to alleviate Italy’s energy shortage include a gas pipeline from Algeria via Sardinia, and the South Stream proposal to pipe Russian gas under the Black Sea through eastern Europe to Italy. Meanwhile at the weekend Romans were sunbathing. Mr Conti may not have to pull the plug yet.

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