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Italy chooses Argus LNG prices for regasification costs

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LNG Industry,

Italian energy regulator Arera has chosen global energy and commodity price reporting agency Argus to provide the LNG prices for a new formula to calculate reserve prices in auctions for LNG regasification capacity.

The formula uses Argus Italy delivered prices and Argus US Gulf coast LNG export prices published in the Argus LNG Daily report.

Regasification involves treating LNG so that it reverts to natural gas and can be fed into the transmission grid. Arera has chosen Argus assessments to ensure that regasification costs are linked directly to the country's import prices, as well as to wider LNG market dynamics in the Atlantic basin.

The new formula used by the regulator is part of extensive reforms to the Italian energy market, which aim to increase the use of LNG terminals, diversify supply sources and improve security of supply.

The formula will initially apply to the Offshore LNG Toscana (OLT) terminal and will be extended later to the GNL Italia terminal in Panigaglia. The two terminals, which are considered part of Italy's strategic infrastructure, have been operating well below capacity in recent years.

Italy is one of Europe's largest gas markets and plays an important role for the continent in balancing competing sources of supply. Increased access to and use of LNG import capacity is an important step in providing competition for pipeline gas supplies from north Africa and Russia, which will soon be supplemented by exports from Azerbaijan. Pipeline gas sales are normally linked to crude prices as well as gas hub prices in northwest Europe.

Argus Media chairman and chief executive Adrian Binks said: "We are delighted that Arera is using Argus LNG prices to support these important regulatory reforms, which aim to improve the use of Italy's LNG regasification facilities and maximise energy security."

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