New demands by the Algerian government for high prices for their natural gas threaten to delay the opening of the new 2500-kilometer Italo-Algerian pipeline and to make the project uneconomic from Italy's point of view.
An Italian delegation returned emptyhanded from Algiers last month after failing to convince the Algerians to stick to the terms of the original 1977 contract between Italy's national gas company, Snam, and its Algerian counterpart, Sonatrach.
Italian officials appear optimistic that a compromise eventually will be reached. But the pipeline's inauguration by Italian President Sandro Pertini has been postponed from this month, and for the time being another date has not been set.
The new price requests by the Algerians reportedly would cost Italy $1 billion a year more now, and double that in 1985, than the price set by the original 1977 contract.
Italian officials point out that that the price, indexed to the prices of diesel oil and fuel oil, already has tripled.
Current Algerian demands of $5.50 per million British thermal units (mBTU)--rising eventually to the oil equivalent price of $7.70--would make the cost of Algerian natural gas uncompetitive on the Italian market.
A spokesman for Snam said that if the new Algerian demands were met, Algerian gas would cost 338 lire a cubic meter here compared with the current price of 240 lire a cubic meter.
In recent years, the Algerians have adopted a policy of seeking oil-equivalent prices for their enormous reserves of natural gas. Negotiations with the French are stalled, and a hefty contract for liquified natural gas with the U.S. El Paso Co. has never become operative because of the increased Algerian demands.
But the 25-year contract with Italy represents the Algerians' largest natural gas investment to date. Indeed, to explain their optimism that a compromise will be reached, officials at Snam and at its mother company, Eni, point to the excellent ongoing technical collaboration between the two parties as well as to the fact that when the project is completed the Algerians themselves will have spent more than $1.7 billion.
The contract commits the Algerians to providing Italy with 4 billion cubic meters of gas this year, rising to 12.36 billion cubic meters by 1985 and until 2006. But once a second tube is laid in the Algerian sector, the pipeline's capacity could rise to as high as 18 billion cubic meters a year.
The pipeline, which took four years to build, runs from an altitude of 750 meters in the Algerian Sahara and, when finally completed in late 1982 or early 1983, will end near Bologna in Northern Italy. Construction has reached the Southern Italian region of Calabria.
The 550 kilometers of pipeline in the Algerian section were financed entirely by the Algerian government, which also paid one-half the high cost of laying three 20-inch pipes across a 156-kilometer underwater stretch below the Sicilian channel at record depths of up to 610 meters.
The pipeline also crosses Tunisia, Sicily and more than 1,000 kilometers on the Italian peninsula. Once completed, the entire cost will be $4.4 billion, 60 percent of which will have been financed by the Italians, 40 percent by the Algerians.
The Italian decision to import such huge quantities of gas from Algeria reflects the fact that natural gas is both cheaper than oil and cleaner.
In 1979 Italy consumed 27.6 billion cubic meters of gas, equal to 15 1/2 percent of its total energy needs. More than 46 percent of this was domestic production, with the remainder imported from The Netherlands, the Soviet Union and Libya, in that order.
The 12.3 billion cubic meters to be imported annually from Algeria starting in 1985 will bring total Italian gas consumption to 40 billion cubic meters, equal to 20 percent of the country's energy needs. A new Italian energy plan seeks to reduce dependence on oil, now representing 67 percent of energy consumption.