London, 3 August (Argus) — Italian gas distributor Snam and Belgian gas system operator Fluxys have signed an initial deal for the development of physical reverse flows as part of Europe's wider south-north corridor development.

The two firms have agreed to conduct a market consultation gauging interest for physical reverse flows between the Italian border at Passo Gries and the Belgian border at Eynatten. The consultation is expected to take place before the end of this year.

The Transitgas pipeline links Passo Gries, through Switzerland, with the Tenp pipeline at Wallbach, on the German border. The Tenp pipeline then connects to the Belgian system at Eynatten.

Reversed flows along the route would also enable further shipments of gas from Italy onward to the UK, through the Bacton-Zeebrugge Interconnector.

Physical reverse flows between the two regions could improve prospects for the Galsi pipeline, which is expected to come on line in 2014 but could face delays amid growing concern over falling demand in Europe.

The 8bn³/yr pipeline, which aims to ship Algerian gas to Italy through Sardinia, is still awaiting a final decree from the Italian ministry of economic development before a final investment decision can be made.

The Trans-Adriatic Pipeline consortium is also vying to ship 10bn m³/yr of gas from the second phase of the BP-led Shakh Deniz development through Greece and Albania to southern Italy. First gas from the second phase of Shakh Deniz is expected in 2018.

And interest in the northbound shipping capacity may ultimately be linked to the success of those import projects, given that Italian wholesale gas prices are generally higher than those prevailing in the UK.

While the UK winter 2012-13 contract has averaged a nearly €1.10/MWh premium to its Dutch equivalent since the start of April — reflecting expectations that the UK will need to call on continental supply to meet peak winter demand — the Italian front-winter contract has averaged a €3.30/MWh premium to its UK equivalent over the same period.

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