Europe Looks To Fill Storage As It Braces For Permanent Halt Of Russian Gas


When Gazprom suspended the stream of fuel earlier this month by way of the Nord Stream 1 pipeline, the European Union—and Germany, particularly—braced for a everlasting halt in that stream. The deterioration in relations between Brussels, Berlin, and Moscow made such a halt a definite chance, however Gazprom restarted the stream of fuel following the top of deliberate upkeep on July 21.

Days later, it mentioned it will scale back these flows to twenty % of capability. Meanwhile, the EU is making an attempt to fill its fuel storage forward of winter. It could fail to succeed in the degrees it must undergo the winter with out extra value and provide shocks.

The objective of the European Union as an entire is to replenish its fuel storage to 80 % full by the top of October, Reuters famous in a current analysis, citing knowledge from Gas Infrastructure Europe. Germany is extra bold, eyeing a storage fill stage of 95 % on the finish of October.

According to Wood Mackenzie analysts, if Gazprom continues sending fuel to Germany at present charges by way of Nord Stream 1, the EU’s total objective may very well be reached. Germany’s, nonetheless, couldn’t.

The analysts mentioned that at 20 % of capability, the Nord Stream 1 pipeline might assist the EU attain a storage fill stage of between 75 and 80 %. However, this would go away the EU with little fuel on the finish of the heating season, one Wood Mac analyst identified.

“As a result, Europe is likely to get through the heating season with only 20% gas in store at the end of March – a very low level,” Kateryna Filippenko informed Reuters.

Meanwhile, fuel storage ranges throughout the EU had been at close to 60 percent as of late June, because of greater than typical injection charges earlier within the 12 months, as U.S. exports of liquefied pure fuel surged to all-time highs.

The newest export knowledge exhibits that the United States provided extra LNG to Europe within the first half of this 12 months than it did by way of the entire of 2021, Reuters reported this month. Europe overtook Asia as the most important purchaser of U.S. liquefied pure fuel early on within the 12 months and continued to be the most important purchaser.

In absolute phrases, U.S. liquefied pure fuel exports to Europe stood at 37 billion cu m for the primary six months of the 12 months, constituting 68 % of complete U.S. exports of LNG. This means precise exports beat President Biden’s promise to ship Europe’s manner a further 15 billion cu m of LNG on prime of 2021 exports. 

The dangerous information is that the speed of exports to Europe has slowed down due to the explosion at Freeport LNG, which led to the suspension of operations on the facility till in regards to the finish of the 12 months. Freeport LNG accounts for a few fifth of U.S. liquefaction capability.

Even at decrease charges, many of the European Union looks as if it is going to amass sufficient fuel to final it by way of the winter, particularly now that the member states of the bloc agreed a voluntary 15-percent discount in fuel consumption.

Germany, nonetheless, is going through a problematic heating season. Europe’s largest economic system is already sputtering due to decrease Russian fuel deliveries and has already needed to pay greater than $15 billion to bail out one in every of its largest fuel utilities, Uniper, which collapsed amid hovering costs and decrease Russian deliveries.

The EU additionally agreed to a solidarity mechanism earlier this week, which is meant to deal with these members experiencing fuel shortages, spurring others into motion to assist the unlucky fellow member.

If fuel provides stay tight all through the EU, nonetheless, there might not be many coming to Germany’s rescue, based mostly on some southern members’ reactions to the entire solidarity and consumption reduce proposal.

“The entire European energy system is going through a crisis, and even with the restart of Nord Stream 1, the region is in a tight position with continued risk to energy security,” Reuters quoted Rystad Energy analyst Karolina Siemieniuk as saying.

“European countries will need to work together fast if they are to survive the winter relatively unscathed and even if they do, the spectre of the next winter in 2023/24 is likely to keep prices elevated for months on end,” Siemieniuk added.

Unfortunately, the one factor that European nations can work collectively on is demand discount as a result of there isn’t a further LNG capability coming to a terminal close to them anytime quickly. U.S. capability will rise this 12 months, as Venture Global’s Calcasieu Pass places into operation new liquefaction items however that enhance would solely be about 200 million cu ft each day.

Next 12 months ought to convey some extra excellent news for European LNG importers when U.S. capability will increase from a complete 13.8 billion cu ft each day this 12 months to 14.2 billion cu ft each day. But first, they need to survive this winter with out inflicting an excessive amount of ache for voters.

By Irina Slav for

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.

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