EU leaders to prioritize joint action on gas storage, procurement at summit

EU leaders are set to lay out plans for improving European gas supply security at a summit on March 24-25, with a focus on joint action on gas storage and gas buying.

The European Commission is also expected to present new regulatory proposals ahead of the summit on March 23 that will include mandatory minimum gas storage levels already for the upcoming winter.

In a leaked draft of the proposals published March 22 by Euractiv, the EC said it aimed at addressing the "very significant risks" for security of supply and the EU's economy resulting from the "dramatically changed geopolitical situation."

"The proposal aims notably at ensuring that storage capacities in the EU, which are crucial to ensure security of supply, do not remain unused, and to ensure that storages can be shared across the EU in a spirit of solidarity," the EC said in the draft.

"A mandatory minimum level of gas in storage facilities will reinforce the security of supply ahead of the winter 2022/2023 and for the following winter periods," it said.

The EC also proposes that the use of storage would be incentivized by allowing storage users to be exempt from transmission tariffs at storage entry or exit points.

In the leaked draft, the EC has also pushed back a target for filling storage sites to at least 90% of capacity to Nov. 1, having previously aimed for a target date of Oct. 1 each year.

There would also be intermediary targets for each member state in February, May, July, and September, and the possibility for the EC to ensure that the filling targets are met in case intermediate targets are missed.

Low stock levels across Europe and the need to refill them over the coming summer have contributed to record high gas prices.

Day-ahead gas on the benchmark Dutch TTF hub was priced at Eur212/MWh on March 7, an all-time high and 230% higher than the start of 2022, according to Platts price assessments by S&P Global Commodity Insights.

European storage sites were filled to just 77% of capacity last summer, and storage facilities were just 25.7% full as of March 20, according to data from Gas Infrastructure Europe.

Joint buying

The EC in mid-December also 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.

EU leaders are expected to approve a mechanism for the joint procurement of gas, LNG and hydrogen by member states at this week's summit.

The EC also plans to propose by mid-May the "phase out" of all Russian fossil fuels by 2027 in response to Russia's invasion of Ukraine.

Earlier in March, it also outlined a plan to reduce EU demand for Russian gas already by two-thirds by the end of 2022 through diversification of supply, increased LNG imports, more renewables and energy efficiency measures.

The EU imported 155 Bcm of Russian gas in 2021, accounting for 45% of imports and 40% of total demand, according to the International Energy Agency.

A low level of gas storage at sites operated by Russia's state-controlled Gazprom -- including Rehden, Katharina, Jemgum and Etzel in Germany and Haidach in Austria -- has also led the EC to propose measures to make sure such sites cannot sit empty.

"A mandatory certification of storage system operators will ensure that potential security of supply risks resulting from influence over the critical storage infrastructure can be excluded," it said.

It proposes a storage system operator certification scheme under which member states would ensure that the owner of the storage system operator "does not put at risk the security of energy supply in the EU or any member state."

The EC acknowledged that member states may not always be able to meet the filling targets on time due to technical issues.

"In such cases, it is appropriate that member states should have the flexibility to meet the target at a later stage," it said.

"However, the filling target should be met as soon as technically possible and no later than on Dec. 1 in order to ensure the security of supply for the winter period."

It also reiterated that EU governments could provide state aid to help with the filling of storage sites.