According to Bloomberg, by the end of September Europe’s gas storage facilities are 71% full, compared with a five-year average of 87%, and in Germany — about 57%. The publication concludes that the old market model for gas storage no longer works.
For decades, this system relied on cheap Russian gas: traders injected it into underground gas storage facilities (UGS) in summer and sold it in winter for a profit, offsetting storage costs. Now that the EU relies more heavily on LNG spot contracts, this model is losing money. Bloomberg пишет that gas for October delivery now costs slightly more than winter gas, and in March, amid tensions around the Strait of Hormuz, summer gas was about $80 per thousand cubic meters more expensive than future winter gas.
“If spreads are consistently negative and storage does not justify its cost, neither investment nor the sustainable operation of UGS is possible”, said Michael Schmelzer, storage director at Uniper Energy Storage’s German unit. According to the article, the most obvious solution is state involvement, which can either replenish strategic reserves or incentivize commercial injection.
Strategic gas reserves exist in only nine EU countries; they amount to 12 billion cubic meters, more than a third of which is held by Italy, Austria, and Hungary. This volume is enough for about two weeks of normal consumption. Germany plans to raise its state reserve to 10% of available UGS capacity and is already effectively subsidizing traders for storage by expanding purchases of options on future gas deliveries, although it rejects direct intervention in the sector’s economics.
France wants to incentivize commercial injection, and Italy has been doing so for several years already. At the EU level, a regulation requires UGS to be 90% full between October and December, which can be lowered to 75% in very unfavorable conditions. Bloomberg пишет that this should be enough to get through the warm winter that Europe is forecast to have this year.
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