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TotalEnergies CEO backs European gas storage plan, urges German power plant construction

Highlights

Europe lacking gas storage obligations similar to strategic oil stocks

German nuclear exit will necessitate more gas generation capacity

Gas prices to remain 'quite high' over winter, prompting fuel switch

TotalEnergies' CEO Patrick Pouyanne gave his backing Oct. 20 to proposals for a system of Europe-wide strategic gas reserves and warned Germany would need to build more gas-fired power generation given its imminent exit from nuclear power and its phase-out of coal.

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Speaking at the India Energy Forum by CERAWeek, Pouyanne said Europe was relearning some energy fundamentals and predicted gas prices would remain "quite high" over the coming winter, prompting a shift to more carbon-intensive energy such as coal.

Gas price surges had exposed a weakness in Europe's gas market, in the form of a lack of storage obligations, while Germany's energy policies would necessitate more gas-powered generation, with the country due to end nuclear generation by the end of 2022, he said.

European Commission President Ursula von der Leyen has said the possibility of setting up a strategic gas reserve similar to that for oil will be on the agenda at a European Council summit of EU leaders on Oct. 21-22.

Pouyanne noted a few European countries place storage obligations on suppliers, but not all. Germany is not among those that do, although it has the largest gas storage capacity in the EU and fourth-largest in the world, according to a 2020 report by the International Energy Agency.

Build gas-fired plants, storage

"When you have a lot of intermittent sources of electricity, then you need to also have some which are controllable. You know the situation in Germany exiting nuclear -- the lesson of all that is: it's urgent that Germany, because they have decided to get out of nuclear, build new gas-fired power plants. We need more in Europe and we need some gas storage as well because when you depend on importation you need to store," Pouyanne said.

"That's the problem, a continental market at a European level, but at the same time national policies -- you have a few countries like France and Italy which have some obligations of gas storage for the gas suppliers, but other countries do not have that. When we created this unified gas market for Europe there was something missing, which is to put an obligation at a European level."

"Some people think that we could get rid of gas ... [but] when a big country like Germany decides to exit nuclear you need to have some baseload and to have flexible fuel to compensate the fact that the wind, solar, or rain for hydro is not permanent and is not a reliable source," he said.

Europe's "gas production is declining, so obviously the only way to manage the ups and downs of importations, and from LNG, is to store," he said, noting similar moves underway in China.

Speaking more generally, and after meeting UK Prime Minister Boris Johnson on Oct. 19 ahead of COP26 climate talks in Glasgow, Pouyanne said: "The first mission of the state is to ensure the security of supply. If we want to build a new system by excluding any investments in the existing [sources], obviously we will face more and more disruptions and problems. But to be clear, consumers will not accept it. We need to find the right balance. Yes, we need to invest more and more ... in renewables and new energies ... but at the same time we need to be sure that we have a reliable system to provide the energy that the world requires today."