German gas grid operator group warns of impact of mandatory storage obligations

Germany's gas grid operators on March 24 warned of the "considerable" financial risk of mandating minimum gas storage levels, despite agreeing that it was important to make provisions for next winter.

The European Commission March 23 proposed new rules on minimum gas storage obligations, saying storage sites in the EU would have to be filled to 80% of capacity by Nov. 1 this year, before rising to 90% in subsequent years.

"The current geopolitical situation is presenting the German energy industry with major new challenges," German industry association FNB -- which represents 12 grid operators -- said in a statement March 24.

"In the current situation, it is right and important to make provisions for the gas supply next winter. We can understand the political intentions to fill the German underground storage as completely and securely as possible. The storage level law can make a decisive contribution to this," it said.

"However, the proposed legislation entails considerable financing risks for the Trading Hub Europe (THE) market area manager," it said.

"These must be secured by the federal government. Even if the costs are ultimately to be offset by a levy, the additional financial burden for gas customers and THE liquidity situation must remain within a calculable and manageable framework."

Low levels

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 ($232/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 77% of capacity last summer, and storage facilities were 25.6% full as of March 21, according to data from Gas Infrastructure Europe.

The EC said storage sites should be filled to 63% of capacity by Aug. 1 this year, and to 68% by Sept. 1 and then 74% by Oct. 1.

FNB said the current political situation was associated with "considerable uncertainties."

"In addition, nobody can currently predict how the planned regulations will affect the gas market and the behavior of the individual players and what specific financial obligations will arise for THE as a result," it said.

"The evaluation should pay particular attention to whether the goal desired by procuring the strategic options -- to achieve high storage levels -- can also be achieved at a reasonable cost, or whether THE has to procure gas to a significant extent," it said.

"It is also important that traders and gas suppliers will also be obliged in future to store at least part of their portfolio for the winter so that they can continue to supply their customers even in the event of supply failures in winter."

Germany in early March already provided funds to THE to procure LNG to help refill the country's gas storage sites.

Germany has no LNG import terminals but can buy LNG for delivery to terminals in Belgium and the Netherlands for onward supply to Germany.