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Europe Can Diversify From Russia Faster Than Believed: Draghi

The European Union can diversify away from Russia in natural gas faster than previously believed, the Prime Minister of Italy, Mario Draghi, said this weekend.

In an interview with Corriere della Sera, Draghi noted an agreement by Italy to increase shipments of natural gas from Algeria and said that “Diversification is possible and feasible relatively quickly, shorter than we imagined just a month ago,” as quoted by Bloomberg.

“We have gas in storage and will have new gas from other suppliers,” Draghi said, adding that the energy conservation measures suggested by other officials—and by the IEA—were “mild”.

These measures include a suggestion for households and offices to reduce heating temperatures by between 1 and 2 degrees Celsius, which, according to the International Energy Agency, could save as much as 10 billion cu m of gas.

“The average temperature for buildings’ heating across the EU at present is above 22°C,” the agency said in its 10-step plan for reducing the EU’s energy dependence on Russia.

“Adjusting the thermostat for buildings heating would deliver immediate annual energy savings of around 10 bcm for each degree of reduction while also bringing down energy bills.”

“Europe continues to finance Russia by purchasing oil and gas, among other things, at a price that has no relation to historical values ??and production costs,” Draghi also told Corriere della Sera, days after Italy inked a deal for higher gas imports from Algeria.

The increase will be about 40 percent from current levels, Reuters reported. The deal comes as the EU discusses joint gas buying in order to ensure the adequate supply of all members, but it appears that Italy has, in the meantime, decided to go it alone, especially since Algeria is conveniently close and already a gas importer to Italy. The country sources some 40 percent of its import gas from Russia.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on April 18 2022 said:
    While the EU can gradually diversify its gas supplies, it will still be dependent on Russian gas supplies for the foreseeable future.

    And while Italy is trying to get more Algerian gas supplies than the current 22 billion cubic metres (bcm) it receives via the TransMed undersea gas pipeline, the maximum additional gas it can secure from Algeria is 32 bcm. Algeria also supplies currently 8.0 bcm of gas to Spain via the MedGaz undersea pipeline that connects Algeria to Spain. However, Algeria’s ability to increase its gas supplies to the EU is limited by its limited production capacity.

    Moreover, the entire LNG exports of the United States, Qatar and Australia and also Norway’s piped gas exports would barely replace Russian gas and LNG supplies to the EU partly because of long-term contractual arrangements with customers in the Asia-Pacific region and also because LNG fetches higher prices in Asia because of much stronger demand and bigger market.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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