October 6, 2008

Snam Rete Gas, Galsi Set Terms for Algeria-Italy Pipeline Section Construction

Italian natural gas pipeline system operator Snam Rete Gas and the Galsi pipeline project company have signed an agreement that sets out the conditions for the construction of the Italian section of the new pipeline importing gas from Algeria to Italy, through Sardinia.

The Galsi project includes the international undersea section from the Algerian coast to the south of Sardinia near Cagliari, and the Italian section comprising the overland section crossing Sardinia to the Olbia area, and a new undersea section to Tuscany near Piombino, where the pipeline will be connected to the Italian national transport network.

The pipeline will be approximately 900km in length overall, of which 600km will be offshore and at a maximum depth of around 2,800m between Algeria and Sardinia. The initial transport capacity will be eight billion cubic meters per year.

The agreement, which follows the memorandum of understanding between Italy and Algeria and lies in the framework of the subsequent inter-governmental accord, addresses the development, realization and start-up of the Italian section of the project. Pursuant to the agreement, Galsi will develop the engineering and obtain the main permits and authorizations required, and Snam Rete Gas will build the pipeline and subsequently manage the gas transport activities.

The agreement confirms the commitment of Galsi, Snam Rete Gas and other project partners to invest extensive resources in the construction of one of the biggest natural gas procurement projects in Italy's history. The agreement also represents the first step towards natural gas supply for Sardinia, which is not supplied by gas.