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Stop Russian gas to Italy: analysts look to potential repercussions for ENI

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Stop Russian gas to Italy: analysts look to potential repercussions for ENI

The stop of Russian gas supplies to Italy is holding its own today. Gazprom announced on Saturday that it could not confirm the delivery of the requested volumes of gas “due to the declared impossibility of transporting the gas through Austria”. The flows of Russian gas destined for Eni through the Tarvisio entry point were therefore zeroed.

Eni, which does not expect to receive flows even today, is working to verify with Gazprom whether it is possible to reactivate flows to Italy. In 2021 ENI had imported 30 billion cubic meters from Russia.

“The volumes supplied by Russia were low in September, or about 15-20 m³ per day (5.5-7.3 m³ annualized). Eni would be trying to compensate with additional supplies from Algeria, from where Italy is receiving daily peaks in volumes of over 80 mn m3 ”, the experts of Equita SIM remarked this morning. From Algeria an additional 6 billion cubic meters will progressively arrive in the thermal year 2022-23, which will reach 9 billion between 2023 and 2024, doubling Eni’s imports from Algeria from 9 to 18 billion cubic meters per year when fully operational in 2024.

What are the repercussions on ENI?

Regarding the potential repercussions on ENIEquita SIM believes there may be negative consequences for the profits of the GGP division, if the stop continues for the next few months. In the second quarter results, ENI indicated that in the gas trading business, contractual obligations could be fully satisfied even in the absence of flows from Russia and without additional costs for ENI. Commitments are mainly for own consumption, Plenitude and B2B. ENI argued that if gas flows from Russia were zero (end of July), the FCF of the GGP division would still remain positive in 2022. The guidance of the GGP division over the whole of 2022 it is equal to 1.2 billion compared to 1.1 billion estimated by Equita which calculates a any low single digit impact on ENI’s group profits.

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In the margin of the 2nd quarter accounts, ENI also indicated that the magnitude of this negative impact would depend on a series of variables, pricing environment, regulatory framework and timing, with a special charge to the Income Statement possibly in the 3rd or 4th Q4 2022.

The road to complete independence from Russian gas

Eni is also working with producing countries such as Egypt, Qatar, Nigeria, Angola, Indonesia, Congo and Mozambique, which will allow them to be completely independent from Russia in the winter of 2024-25, in the presence of the necessary regasifiers. It should be remembered that there are 10-11 billion cubic meters in storage so the situation would seem manageable for the winter (unless complicated events), while the daily peaks in consumption remain a sensitive element in the management of the emergency.

We believe that the stop of Russian gas, if prolonged, could have negative implications on the level of storage from the end of winter, as the gap between supplies (-20/30 billion cubic meters vs 2021 from Russia) and new supplies (+ 6 / 7 billion from Algeria) is significant.

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