EU considering mandatory gas storage level obligations

Diane Elijah

04-Mar-2022

LONDON (ICIS)–EU gas stocks must be at least 80% full by 30 September for the EU to be better prepared for the next winter, according to a European Commission-drafted document seen by ICIS. To achieve such a level, the commission suggests several measures for member states to implement, with cost shortfalls to be covered by states.

This draft file indicates what is likely to be in the commission’s energy communication to be announced next week. This communication will contain measures that member states can implement to alleviate the rising energy prices and mitigate their impact on consumers and companies. This will complement a similar so-called toolbox announced by the commission last October.

INJECTION PROJECTION

Assuming an average withdrawal rate of 191 million cubic metres (mcm)/day, the March withdrawal rate of 2017-2022, ICIS estimates commercial storage sites across the EU27 will be just under 17% full at the gas winter’s end on 31 March, holding 16.1bcm of gas.

This means that to reach 80% of gas in store by 30 September across the EU, shippers would need to inject around 61.6bcm during the gas summer, roughly 336mcm/day.

These figures include Gazprom-operated EU storage sites.

Aggregate EU27 storage levels were particularly low at the start of the 2021 gas winter because Gazprom-operated stocks were very low.

However, even if these Gazprom-operated storage sites were not refilled, the total volume they comprise is lower than the remaining 20%, or 19.4bcm. This means that other storage sites could be fully filled and the 80% threshold would be met.

EU strategic stores, which are not included in the above estimates, remain at around 96% of capacity, which is just under 9bcm.

The commission’s draft document forecasts that storage may be 10-20% full in spring 2022 depending on weather conditions, which is in line with ICIS’s projection. The 10-20% scenarios would require 58.3-70bcm to be injected into commercial storage.

INJECTION OBLIGATION PROPOSALS

In the draft, the commission proposes a range of measures to ensure summer injections, including:

– an obligation on storage users to store a minimum volume of gas in underground storage

– an obligation on storage owners to tender storage capacities, with shortfalls in costs covered by the state

– a request to transmission system operators or balancing operators to purchase and manage strategic stocks of gas

– increasing the rebate on transmission tariffs to storage from 50% to 100% as an incentive to refill storage

The commission is also considering:

– setting up a legal requirement for member states to ensure a minimum level of storage by 30 September every year

– a requirement to take into account the risks related to the control of strategic assets by third country party entities.

Storage levels should also be determined per member state, taking into account relative size and security of supply value of storages across the bloc, the draft document said.

GAZPROM’s EU STOCKS

Russia’s state-controlled producer Gazprom has storage facilities in Germany, Austria, The Netherlands and the Czech Republic with a combined storage capacity of 13.9 billion cubic metres (bcm).

Concerns regarding Gazprom’s strategy for its EU-based storage arose when, in late October, these facilities held just 3.9bcm of gas compared with an average 12.7bcm the same time of year in 2017-2020. These storage facilities were also below the EU average of non-Gazprom-owned storage.

Russian president Vladimir Putin instructed Gazprom to start injecting into these facilities as soon as Russia’s domestic injections would be completed in early November. But these Gazprom-associated storage facilities only reached a maximum of 4.2bcm in late November and have been decreasing since then.

Gazprom has been the focus of the commission’s investigation launched last year which looks into possible distortions of competition by companies active in EU gas markets. In its draft paper seen by ICIS, the commission said Gazprom “displays unusual business behaviour” and underlined that EU Gazprom-operated storage is around 16% full against 44% for non-Gazprom storage.

LNG

The bloc’s supply is becoming more diversified thanks to increasing LNG imports, which could partly compensate lower pipeline deliveries. The commission’s document says this has been thanks to the EU’s energy diplomatic outreach.

More LNG has come to the EU since the start of the year, triggered by EU hub prices reaching such highs that they out competed Asian prices.

Additional reporting by Gretchen Ransow.

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