German government mulls introducing strategic natural gas reserve

Against the backdrop of continuous supply fears related to the geopolitical conflict between Russia and Ukraine, the German government is considering introducing a strategic reserve for natural gas storage sites in order to secure supply.

The economics ministry has now issued a tender for a study looking into how such a strategic reserve could be put in place, or if voluntary commitments from market participants would be the preferable option.

The tender was launched after the Bundesrat, the upper house of the German parliament, called on the government to create a national reserve of 10 billion cubic metres (bcm), high enough to cover the country’s gas needs for 45 consecutive days at any given time.

Traders polled by ICIS on Thursday were strongly opposed to the move, saying that if participants could not decide freely on how to use their booked working gas volume any more, most storage products would become even more unattractive.

Germany’s storage operators have already been struggling with shrinking price spreads between summer and winter gas, which have made the traditional model of summer-winter arbitrage unviable. Fast-cycle storage sites which can be used for short-term optimisation are the most popular type of storage, with capacity owners being able to quickly react to changing price spreads.

This short-term optimisation is precisely what the Bundesrat has recently taken to criticise, saying that due to the advancing liberalisation of the gas market, the country’s storage sites have been losing importance for security of supply.

A national gas reserve would also support the troubled gas storage industry, potentially avoiding that facilities might have to close down because they have become unprofitable, the Bundesrat argued.

The council also voiced concerns over German storage capacity being owned by foreign investors and asked the government to look into creating a new law in order to ensure “that German infrastructure cannot be used in a way that is in conflict with national interests”. It added that at the end of 2014, about a quarter of Germany’s 23bcm of working gas capacity will be owned by foreign companies.

Russian producer Gazprom – which supplies about a third of Germany’s domestic demand – has recently acquired shares in a number of German storage sites via an asset swap with German producer Wintershall. Gazprom is in the process of taking control of trading and supply company WINGAS, including its storage subsidiary astora, which operates 6.3bcm of working gas capacity in Germany ( see ESGM 27 December 2013 ). The Russian incumbent is also taking control of Europe’s largest underground gas storage facility Rehden – with more than 4bcm of capacity.

The planned study on a potential national gas reserve is due to be commissioned by mid-October. Johanna Blackader