London (Platts)--22Feb2011/958 am EST/1458 GMT

Italy's second-biggest utility Edison, which has a contract to buy 4 billion cubic meters/year of gas via the Greenstream pipeline from Libya, has been warned by supplier Eni that it "cannot guarantee" delivery of the contracted volumes, according to an Edison source.

The Edison source said the company had received a note from Eni regarding the Libyan volumes.

Edison says it has a diversified portfolio of gas supplies, "so up to now we don't see this as a major problem."

Edison's supplier countries include Algeria and Norway, together with LNG from Qatar via Adriatic LNG, Rovigo. The company has no personnel in Libya.

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The 540 km (340 mile) Greenstream pipeline transported 11% of Italy's gas imports in 2010, about 9.4 billion cubic meters of gas. It runs from Mellitah in Libya to Gela in Sicily, Italy.

Greenstream was constructed and is owned by Agip Gas, a joint venture between Eni and the National Oil Corporation (NOC) of Libya.

According to latest data from Italy's gas grid operator Snam Rete Gas, Greenstream imports into Italy amounted to 25.8 million cu m on February 20.

Italian foreign minister Franco Frattini, visiting Cairo Tuesday, told journalists that "in the current state of events" no suspension of gas supply has taken place.

He called on the Tripoli government to "listen to Europe's appeal and stop the violence against civilians."

Back in Italy, the undersecretary for industry, Stefano Saglia, told reporters that while supplies from Libya have not been interrupted, the situation is "very complicated."

"In the case of eventual interruptions, we have non-commercial [strategic] gas storage capacity available for security purposes," Saglia said.

The European Union also stressed that Italy will not face disruption of gas supplies despite the civil unrest in Libya.

European Commission energy spokeswoman Marlene Holzner told journalists in Brussels Tuesday: "There is no problem with gas supply in general to Italy. Only 12% of gas imports to Italy come from Libya and this is a small amount."

According to the EC, 33% of Italy's gas imports come from Algeria, 30% from Russia and 9% from Norway.

"There is currently lots of gas on the market. In the last few years not all imported gas in the market had been supplied, so there is enough gas for households and businesses in Italy," Holzner said.

EU energy policy promotes the diversification of gas supplies away from Russia. But the developments in North Africa and the Middle East will raise concern that some of the alternative supply countries are unreliable.

However, Holzner said the EU would not consider changing its energy policy.

"Our policy will not change, we are seeking gas from the Caspian region, more and different sources of supply -- that has not changed," Holzner said.

Within Europe, Libya only delivers gas to Italy and Spain. Libyan gas represents 1.5% of Spanish imports. Holzner said that this proves that diversification is effective.

"In Italy or Spain, if there is a disruption they can look to other countries and get gas there," she said.

--Eloise Logan, eloise_logan@platts.com

--Jaime Concha, jaime_concha@platts.com

--Rachel Morison, rachel_morison@platts.com