Gassy ambitions: The obstacles to Italy’s planned gas hub for Europe

The Italian prime minister, Giorgia Meloni, and her government have revived Italy’s ambitions to become a gas hub for Europe. In her first 100 days in power, Meloni has shown considerable initiative in the Mediterranean region, signing an $8 billion gas deal with Libya’s national oil corporation to develop two Libyan offshore gas fields, and reaffirming her commitment to further energy cooperation with Algeria. This aspiration is nothing new, but past attempts were hampered by technical, economic, and geopolitical circumstances. The success of Meloni’s plan will be limited by the same factors if it does not form part of a broader European energy strategy.

The goal to transform Italy into an energy hub dates back to the 1990s, when the Trans-Mediterranean pipeline connecting Italy with Algeria (via Tunisia) was put into operation, followed by the Greenstream pipeline between Sicily and Libya in the early 2000s. Europe’s growing demand for gas then incentivised Rome to begin work on new infrastructure across the Mediterranean. Some projects were completed – such as the Trans Adriatic Pipeline that brings gas from Azerbaijan to southern Italy – while others remained on paper, including the “Galsi” pipeline (which was meant to run between Algeria and northern Italy via Sardinia) and the EastMed pipeline that was supposed to bring gas from the eastern Mediterranean.

These projects never saw the light of day for a number of reasons. The first was of a technical-economic nature. The shale gas revolution, its transportability as liquefied natural gas (LNG), and low prices increased the availability of gas globally, making some of these investments no longer economically viable. The second reason was geopolitical. In the wake of the 2011 Arab uprisings and the resulting instability in North Africa, such engagement in the region came to be regarded as too risky. European governments started to perceive Russia – incorrectly – as a more reliable and cheaper partner. Several European countries, such as Germany, began to push harder for European energy security to be tied to Moscow, while the United States greenlighted projects such as Nord Stream 2. Rome’s good relations with the Kremlin ultimately led it to shelve its ambition to play a strategic role in this area.

Today’s evolving geopolitical scenario has revived Italy’s ambition to play a leading role in European energy security. Europe’s relations with Russia, regardless of the outcome of the war in Ukraine, will remain strained for a long and indefinite period of time. European countries are already reshoring energy production to the Mediterranean and the Middle East. Meloni has pledged that Italy is not seeking a “predatory” role in Libya or Algeria, arguing that the gas plan was inspired by Enrico Mattei, the post-war founder of Italy’s state-run energy company ENI, which was the first large Western company to offer fair deals to oil-producing countries. Meloni’s predecessor, Mario Draghi, also signed numerous agreements with gas producing countries in an effort to find alternatives to Russian gas as quickly as possible. Thanks to those efforts, since Russia’s invasion of Ukraine, Italy has dramatically reduced its use of Russian gas from 40 per cent to 16 per cent of its total gas consumption.

However, Italy’s ambition to become a gas hub faces several significant – and legitimate – obstacles. Firstly, this strategy focuses on short-term gains, without taking into account technical considerations. With the European Green Deal, the European Union has committed to a green energy transition, aiming to achieve climate neutrality by 2050. According to some estimates, European gas requirements in 2030 could be between 30 and 50 per cent lower than in 2019, meaning investments in exploration and development infrastructure may not be cost-effective, especially given the time required to put the necessary infrastructure in place. Analysts have warned that in order to ensure energy security, fossil fuels need to quickly be replaced with renewable energy, particularly in the face of the world’s growing population. The International Energy Agency indicates that the demand for global energy will fall by 23 per cent by 2050 compared to 2021, and gas supply will shrink by 90 per cent.

Italy could justify the construction of new gas infrastructure if it could convert the network to transport cleaner hydrogen fairly easily. But the existing pipelines would only allow for small amounts of hydrogen to be transported. Given that energy requirements are expected to decrease, it would be preferable to opt for ad hoc infrastructure rather than repurposing existing pipelines. The same considerations have led Spain and France to reach an agreement for the construction of a pipeline in the western Mediterranean exclusively dedicated to hydrogen. The validity of such initiatives ultimately depends on the EU’s decisions concerning the energy mix for the industrial sector, which will make or break Italy’s strategy.

The second legitimate obstacle also relates to EU strategy: without renewed political and economic European investments on the southern shore of the Mediterranean, insecurity, political crises, and a lack of clear governance will limit Italian initiatives in the region. The process of southward reshoring by the EU should be accompanied by broader investment initiatives that would support the stabilisation of the area in the long run. The EU launched several investment mechanisms just before Russia’s invasion of Ukraine, such as the Global Gateway to boost smart, clean, and secure infrastructure in digital, energy, and transport sectors around the world. But it seems hesitant to play a more prominent political role in the region, leaving member states to develop various bilateral arrangements with countries in the region.

Finally, Europe could fall into the same geopolitical pitfalls of the past if it entrusts European energy security to fickle and undemocratic actors, some of which – like Algeria – may still be in Moscow’s orbit. By forging a new agreement in Libya with the Dbeibah government, whose international legitimacy is very fragile, the Meloni government has lent greater weight to an actor who has opposed elections in the past, while at the same time helping the United Nations push for a new roadmap for the country. Some analysts have argued that Italy’s increasing focus on energy security could also help the stability of the Algiers-EU relationship and Libyan economic health. But even if this is the case, the Italian plan cannot succeed if detached from a broader European strategy.

There is no shortage of competitors vying for leadership roles in European energy security: Spain has set its sights on regasification terminals and possesses adequate capabilities to receive LNG from the US, but it does not have sufficient infrastructure to deliver this to other countries; Norway remains a major energy producer and is also focusing on hydrogen through a strengthened partnership with Germany, as well as having built the world’s largest offshore wind farm.

A true European energy union is still a long way off, but the EU has created several coordination mechanisms, including an energy price toolbox of measures to tackle rising energy prices. Given the EU’s crucial role in determining the energy mix for the region and investments for partner countries, Italy’s ambitions can only succeed in combination with a broader European approach. The Italian government should therefore become more involved with European plans and develop a greater capacity to influence decisions at the European level, especially in the context of the new Green Deal Industrial Plan. Otherwise, its ambitions will once more be undermined by broader European technical, economic, and geopolitical concerns.