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EC mulls imposing minimum gas storage requirements on member states: draft

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EC mulls imposing minimum gas storage requirements on member states: draft


Leaked communication points to storage reform

New action plan to be ready for March: Simson

Germany focused on gas storage incentives

  • Author
  • Stuart Elliott    Andreas Franke
  • Editor
  • Jonathan Loades-Carter
  • Commodity
  • Natural Gas

The European Commission is considering imposing minimum gas storage requirements on member states to improve gas supply security in Europe, according to a leaked draft communication.

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In the leaked document, the EC also said it expected gas and power prices to remain high "and volatile" until at least 2023.

European gas prices hit record highs in December on winter supply concerns amid very low storage levels.

The TTF day-ahead price hit an all-time high of Eur182.78/MWh on Dec. 21, an increase of 985% year on year, according to S&P Global Platts assessments.

The TTF day-ahead was assessed on Feb. 22 at Eur78.83/MWh, still 375% higher year on year, despite storage levels having improved on mild weather in January and February.

At present, only Italy among the EU member states has a requirement for maintaining minimum storage levels, while France also has some regulated elements in its storage sector.

However, the gas crisis in Europe this winter has pushed the EC to consider taking new action on storage regulation.

"The Commission proposes a legal requirement for member states to ensure a minimum level of storage by Sept. 30 every year," it said in the leaked draft published by media group Euractiv.

"In addition, the Commission urges member states to set inventory levels for entities owning storage facilities in the EU," it said.

Storage incentives

According to the leaked draft, the EC would also allow member states to provide aid to incentivize suppliers to ensure sufficient stocks of gas.

It said it would also start a pilot project to support member states and operators in carrying out joint procurement operations to fill storages in 2022 to the minimum required level.

European storage stocks were built to only 77% of capacity last summer due in part to low Russian flows and the fact that a long winter had seen stocks drawn down to historically low levels last spring.

Storage sites were just 31% full as of Feb. 21, according to data from Gas Infrastructure Europe.

A spokesperson for the EC told S&P Global Platts on Feb. 23 that it did not comment on leaked documents.

However, EU energy commissioner Kadri Simson on Feb. 21 said the current situation around energy prices and markets called for further EC action.

"A new communication is in preparation and should be ready before the European Council in March," Simson wrote on Twitter.

'Strategic approach'

In October, the EC unveiled a toolbox of measures designed to help governments tackle the extreme energy price crisis.

It pledged at the time to consider revising EU security of supply regulation to ensure "better use and functioning" of gas storage in Europe.

"The crisis has drawn attention to the importance of storage for the functioning of the EU gas market," the EC said at the time.

"The EU currently has storage capacity for more than 20% of its annual gas use, but not all member states have storage facilities and their use and obligations to maintain them vary," it said.

Then in December, the EC proposed measures to allow for the voluntary joint purchase of gas by member states to help keep storage levels high as part of its much-anticipated gas market reform proposals.

The EC said its proposals would foster a "more strategic approach" to gas storage and integrate storage considerations into risk assessments at the regional level.

"The proposal enables voluntary joint procurement by member states to have strategic stocks in line with the EU competition rules," the EC said.

"The measures will help ensure a high filling level of storage at the beginning of the heating period in the EU. The larger the volume of gas 'in stock' the more the EU can compensate for temporary shortages of gas supplies," it said.

German plans

Germany, meanwhile, is looking to use incentives and regulation to ensure operators fill their storage sites, rather than considering the creation of a national strategic gas reserve overseen by the government.

Germany has the biggest gas storage capacity in the EU at around 23 Bcm, according to GIE data.

However, as of Feb 21, German storage sites were just 31% full, the data showed.

"We must ensure that gas storage sites are full before the winter," German economy minister Robert Habeck said Feb. 21.

"We will regulate the gas market again," he said during a press conference in Dusseldorf. "We must change things. We must reduce our dependence on gas. And regulate markets accordingly."