Italian energy company ENI confirmed that Libya's natural gas exports via the Greenstream underwater natural gas pipeline have been suspended Feb. 22 as a result of the unrest in the North African country. The news comes amid reports that oil exports have also been disrupted due to the blocking of oil terminals and difficulties with communications within Libya. Though it is difficult to confirm information emerging from Libya regarding crude oil exports, the threat appears to be growing more serious that oil exports will be curtailed as the crisis continues. Even if export capacity remains intact, there is a danger that production could suffer, with 6 percent of oil output reportedly already offline. This is dire news for Italy, which is heavily dependent on Libyan energy for approximately 24 percent of its crude and 15 percent of its natural gas. As the largest importer of Libyan crude and essentially all of its natural gas — a very small amount of Libyan natural gas goes to Spain via a liquefied natural gas export terminal — Italy is the first European country to be hit in any material way by the crisis in Libya. The Italian government has indicated that it has oil reserves for 90 days and natural gas reserves for 30 days. With unrest in Libya potentially leading to further violence and instability, Italy could face supply problems on crude oil, refined products and natural gas imports. Italy relies on the North African country for approximately 24 percent of its crude imports, its single largest source. Libyan oil has a low sulfuric content, which is preferred because EU standards require low sulfur levels in refined petroleum products. However, Italy does have other sources of crude that could replace Libyan "sweet" crude, including Iran and Azerbaijan, which together account for 17 percent of Italian imports. Furthermore, according to STRATFOR sources in the Russian energy industry, Russia has the capability to step in and help Italy. According to sources, Russian storage tanks have 85 million barrels of oil, as well as 45 million barrels of refined products, on hand. Nonetheless, getting the oil to Italy would be a problem considering that most of the crude would have to transit the Dardanelles from the Russian port of Novorossiysk, a route that is already congested. Moscow's claim that it could replace Italy's Libyan imports may therefore be more of a diplomatic move designed to offer Rome help. In terms of refining, Italy's 17 refining facilities have a refining capacity of 2.3 million barrels per day (bpd), with current throughput at 1.8 million bpd, leaving a healthy excess capacity of 500,000 bpd. Replacing Libyan sweet crude with other more "sour" crude, such as Russian, should also not be a problem. More than half of Italy's refineries have the desulphurization units required to process Russia's sour blend, for a total desulfurization capacity of 1,776 tons per day. At current levels, STRATFOR estimates that Russian crude exports to Italy would create about 385 tons of sulfur per day, leaving Italy with plenty excess desulfurization capacity. (click here to enlarge image) A more serious concern is the cutoff of natural gas exports via the Greenstream pipeline. At the moment, Italy receives around 15 percent of its natural gas needs from Libya — around 9.5 billion cubic meters (bcm) annually — via that single underwater pipeline. Replacing this steady stream of natural gas would be more difficult for Italy, although it does have liquefied natural gas (LNG) import capacity — two LNG facilities with total import capacities of 11 bcm and another coming online in mid-2011 — and 30 days of natural gas storage to tap in case of a total breakdown of natural gas shipments. The storage is intended to address a total breakdown of Italy's natural gas supply — Italy consumes around 77 bcm of natural gas annually — which means that it would last quite a while longer if only the 15 percent from Libya was cut off. Furthermore, the Trans-Mediterranean pipeline that takes natural gas from Algeria via Tunisia to Sicily has a capacity of 37 bcm, of which only 25 bcm was used in 2010. ENI has already issued a statement that the cutoff would not present a problem for its natural gas distribution to customers, but as unrest continues, the situation regarding both natural gas and oil could easily grow more difficult.