Eni Joins Venezuela Gas Push but Punishing Royalty Structure Complicates Atlantic LNG Supply for Italy
A new Eni-Repsol arrangement in Venezuela adds Atlantic LNG supply optionality for Italy, but a 30% gross royalty and mandatory minimum taxes make project economics treacherous.
Eni and Repsol finalized a joint strategic arrangement with Venezuela's Ministry of Hydrocarbons for a major gas project at the jointly owned Cardón IV block, oilprice.com reported on Monday (2026-08-17). The deal landed as ICE Endex TTF front-month gas traded at €61.79/MWh — leaving Italy's coal restart threshold at €70/MWh just over €8 away, close enough that a sharp winter draw or supply disruption could breach it before the heating season peaks.5,3
Italy's energy minister Gilberto Pichetto Fratin said on Monday (2026-05-18) that mothballed coal plants could be reactivated if gas prices surpassed €70/MWh, citing exposure to geopolitical volatility. Italy has ended coal-fired generation, making that figure a hard policy backstop rather than a soft preference. The minister's comment implies limited price headroom before the government faces pressure to act, a constraint that storage operators and generators are presumably building into their seasonal planning.3
What connects Venezuela to Italian gas balances is the Atlantic LNG arbitrage. BP has said it will pipe gas extracted from the Loran Phase 2 block directly to Trinidad, bypassing new Venezuelan infrastructure, whereupon it will be liquefied at the Atlantic LNG export terminal, in which BP holds a 45% stake, for shipment to global markets.5 European buyers, Italy included, sit within reach of Atlantic cargoes when the netback justifies the route.
The Loran Phase 2 block alone holds an estimated 4 trillion cubic feet of recoverable natural gas, straddling the border with Trinidad's Manatee and Manakin fields, which are estimated to contain up to 10 Tcf.5 Eni's Cardón IV arrangement is a separate but parallel piece of the same Venezuelan expansion drive. Combined, these projects represent potential additions to Atlantic Basin LNG supply that European buyers would eventually receive.
But Venezuela's fiscal regime poses a serious obstacle to the timeline. The government charges a 30% baseline royalty on gross oil revenue, paid before any costs are deducted, regardless of global price levels. Corporate income tax sits at 50% of net profit. A mandatory alternative minimum tax means the government collects 50% of the total gross value of extracted oil before operating costs are calculated.5 That stacking of levies creates a fiscal take structure more burdensome than regional competitors including Brazil, Guyana, and Colombia.
Venezuela's acting president Delcy Rodríguez introduced the 2026 Hydrocarbon Law Reform to address this, seeking to replace the web of extra levies with a simpler structure.5 The reform's final fiscal terms and legislative status are not confirmed in available reporting. Without clarity on what companies will actually pay, Cardón IV and adjacent gas projects remain difficult to sanction. Announcements and MOUs are not final investment decisions.
Italy's regulator Arera is managing risk on the European side. On Wednesday (2026-05-20), Arera introduced an incentive scheme to push gas storage fills to 90% of capacity ahead of winter, Montel reported.2 The premium pulls forward seasonal demand that would otherwise spread more gradually through summer, tightening the implied draw on European supply during the injection period. If Atlantic Basin volumes from Venezuela arrive later than buyers assume, that demand pull lands earlier in the season.
U.S. production offers a partial buffer. The EIA's August (2026-08-12) Short-Term Energy Outlook forecast U.S. marketed natural gas production will average 122.5 Bcf/d in 2026, exceeding the previous record of 118.5 Bcf/d set in 2025.4 Lower 48 output averaged 117.2 Bcf/d in the first quarter of 2026, up 4% year on year, with Permian production expected at 29.2 Bcf/d for the full year, per the EIA's May outlook.1 That volume supports U.S. LNG export capacity and, through Atlantic cargoes, limits how far TTF can move in a supply crunch. It does not replace the missing Venezuelan increment.
Brent crude front-month was trading at $91.38 a barrel as of Tuesday (2026-08-18), carrying bullish supply signals that sit at odds with broadly bearish positioning in European gas markets. If Venezuela's 2026 Hydrocarbon Law Reform passes with fiscal rates that work for Eni and Repsol, and both companies confirm a Cardón IV investment timeline, the medium-term Atlantic LNG supply picture shifts materially. If the reform stalls, project timelines slip and the Atlantic Basin stays dependent on U.S. volumes alone.5
Confirmation arrives when Rodríguez's reform reaches a final legislative vote with specific fiscal rates published, and Eni discloses whether Cardón IV has cleared a final investment decision. Those two events, not the current €8 spread to Italy's coal restart trigger, set the trajectory for Italian gas imports over the next two winters.5