Europe Natural Gas Security Case Study
Italy’s Gas Portfolio Realignment
By early 2020, Italy had developed a diversified gas import strategy. A diverse range of sources including Russian gas import via TAG and Yamal pipelines, Algerian gas through TransMed, Libyan gas via Greenstream, and a growing LNG portfolio through Rovigo and Livorno terminals. The launch of the TAP pipeline in 2018 brought Azeri gas from the Caspian Sea, reinforced Italy’s position as a flexible Southern European gas hub.
In the aftermath of Russia’s invasion of Ukraine, Italy rapidly reduced Russian gas from around 40% of imports to under 10% and LNG was scaled up, additional floating storage and regasification units (FSRUs) were deployed, and TAP utilization increased to compensate, and eventually U.S. and Qatari LNG cargoes will phase out Russian flows.
The set of reactions listed above, and the shift has been framed as a case of effective diversification. But the diversification has happened at the level of source of the natural gas, but it does not necessarily imply elimination of risk. The underlying structural dependencies in Italy’s gas system across supply, demand, infrastructure, and pricing remain largely unchanged. It is important to study energy dependencies with another layer of depth and go beyond news coverage of contracts and LNG shipment counts.
System Overview
According to the IEA’s 2024 country-level data and the 2023 Italy Energy Policy Review, natural gas continues to play a central role in Italy’s energy system. In 2023, gas accounted for 45% of total electricity generation, producing approximately 119 terawatt-hours (TWh). Despite diversification efforts, more than 96% of the country’s gas supply was imported, a near-total reliance on external sources.
An estimated 30% of these imports now arrive in the form of LNG, showing the rapid expansion of regasification capacity in recent years. However, this shift has not been accompanied by a revival of domestic output. Italy’s natural gas production in the meantime shows an 84% decline since 2000.
Gas storage infrastructure provides approximately 16 billion cubic meters (bcm) of usable capacity, offering some seasonal balancing, though not necessarily resolving infrastructure risks tied to import volatility. On the emissions front, natural gas combustion was responsible for 130.3 million tonnes (Mt) of CO₂ in 2022, representing 42% of Italy’s energy-related carbon emissions.
Overall, consumption patterns remain structurally unchanged. In 2023, the residential sector accounted for more than 43% of total gas use, almost 32% in industry, around 19% in commercial and public services, and 3-4% in transport.
Italy ranks third in Europe in total gas consumption and the second-fastest growing LNG importer in the region since 2022. That is why I chose Italy as a case study for a critical natural gas player in Europe’s post-Russian gas landscape.
LNG Expansion
The core of Italy’s gas transition has been the expansion of LNG infrastructure. In addition to the Rovigo and Livorno terminals, new FSRUs in Ravenna and Piombino have increased import capacity. These facilities provide flexible access to spot markets and non-pipeline sources, especially the U.S. and Qatar.
Beyond Italy’s infrastructure and supply mix, Eni plays a critical role as a globally integrated energy company with state-backed legitimacy and technical depth. Eni has leveraged its upstream assets, engineering capabilities, and geopolitical relationships to help Italy diversify away from Russian gas. Its operation includes key LNG-producing regions like Mozambique, Angola, Egypt, and Indonesia.
However, LNG flexibility comes with a different set of exposures:
Terminal saturation as several terminals operate near maximum throughput, limiting their utility in extreme supply shocks.
Price risk of the way that LNG cargoes respond to global spot price arbitrage. In tight markets, Atlantic LNG cargoes can be rerouted to Asia.
Geopolitical chokepoints for LNG routes in the Suez Canal, Strait of Hormuz, and volatile Red Sea corridor. These maritime corridors face risks ranging from conflict spillovers to piracy and blockades.
Contractual structure because most LNG imports are on a hybrid mix of long-term and spot contracts. Spot exposure in 2022–23 created significant price volatility for Italy’s regulated and industrial consumers.
Italy has replaced pipeline dependence on Russia with global LNG exposure. While that reduces bilateral leverage, it introduces price and logistics risks that are structurally different, but not necessarily smaller.
Storage and Infrastructure
Gas storage is a key to short-term energy resilience. Italy’s current storage at 16 bcm is only 25% of annual consumption. The country has plans to expand toward 20–25 bcm to match Germany’s scale. Storage facilities are geographically concentrated in northern Italy. During winter surges or southern supply disruptions, regional bottlenecks may limit real-time drawdown effectiveness. A portion of storage is commercially held by suppliers, not necessarily aligned with national security objectives.
Parallel to storage, Italy’s electricity grid is undergoing an upgrade. Terna’s €23 billion investment program targets RES integration, digital grid monitoring, and interconnection reinforcement. But the north-south imbalances persist (this is similar to Vietnam’s RE feeding the national grid). Solar and wind growth is concentrated in southern regions, while consumption centers are in the north which adds to transmission stress.
Secure Substitution
Italy’s current gas system reflects a change in suppliers, not a transformation of risk exposure. TAP has increased Azeri gas flows, but these volumes transit politically sensitive regions. Algeria and Libya continue to face reliability challenges. Libya’s Greenstream pipeline has seen repeated disruptions. LNG, while geographically diverse, carries its own set of risks tied to global market volatility and maritime security. None of these sources provide insulation from price contagion or simultaneous market stress. Italy has reduced its bilateral dependency on Russia, but remains reliant on imported gas, globally mobile LNG, and a power system still anchored in gas combustion.
As researchers like Szulecki and Högselius have emphasized, real energy security comes from structural resilience and not just diversification of source. Italy’s system is not yet structurally resilient.
A realistic approach to improving Italy’s gas security should focus on the following:
Reform LNG procurement by securing long-term contracts with flexible volume and pricing formulas to limit spot price exposure
Expand storage with regional balance to increase capacity and prioritize geographic diversification
Target demand-side transition towards electrification of industrial process energy requirements and building heating systems.
Sources:
Szulecki, K. (Ed.). (2018). Energy Security in Europe: Divergent Perceptions and Policy Challenges. Palgrave Macmillan. https://doi.org/10.1007/978-3-319-64964-1
Högselius, P. (2019). Energy and Geopolitics. Routledge. ISBN 9781138038394
International Energy Agency (IEA). (2024). Italy – Country Profile 2023 Energy Data. Retrieved from: https://www.iea.org/countries/italy
International Energy Agency (IEA). (2023). Italy 2023 Energy Policy Review. Paris: IEA. https://www.iea.org/reports/italy-2023
Keypour, J. (2022). Replacing Russian gas with that of the United States: A critical analysis from the European Union energy security perspective. Russian Journal of Economics, 8(2), 189-206.
Krikštolaitis, R., Bianco, V., Martišauskas, L., & Urbonienė, S. (2022). Analysis of electricity and natural gas security. A case study for Germany, France, Italy and Spain. Energies, 15(3), 1000. https://doi.org/10.3390/en15031000