European Gas Storage is Filling Up, but at a High Cost

European countries are likely to succeed in filling their gas storage facilities before winter as planned, but the costs will exceed 50 billion euros, ten times higher than the average filling costs of previous years, writes Reuters.

European governments fear that the Russian reduction in supply through the main pipeline – Nord Stream 1 – will cause significant problems for Germany and other countries in their efforts to fill underground gas storage. However, it seems that the Germans are managing to fill them by combining reduced demand, switching some power plants to coal, and increasing imports of liquefied natural gas (LNG).

The average filling level of European gas storage last week was 70.5 percent, according to data from Gas Infrastructure Europe (GIE). The European Union plans to achieve an 80 percent filling level by November 1 to ensure reserves for the winter months of highest demand. The EU has also set temporary targets for each country and for each month.

Germany, which has been hardest hit by the reduced gas flow from Russia, is more ambitious and intends to fill 95 percent of its storage by November. Increased LNG imports are helping. It is estimated that the EU imported 21.4 million tons of LNG in the first half of the year. Last year, it imported 8.2 million tons in the same period.

In June, for the first time in history, the contribution of American LNG to Europe’s gas supply was greater than that of Russian gas.

Despite Europe being on track to meet its gas storage filling targets, analysts warn that its dependence on Russian gas is far from over and that Europe remains reliant on how cold the winter will be and how much Russian gas will flow to Europe in the spring. Uncertainty in both cases is likely to keep prices high even if supplies continue to grow in the coming months.

Ten Times More Expensive

Analysts and industry experts warn that filling storage to targeted levels would be impossible if Russia completely halts gas supplies to Germany through the Nord Stream 1 pipeline.

Meanwhile, private companies are primarily responsible for filling the storage, to which European governments have offered incentives, loans, and subsidies to assist them in purchasing gas as prices have reached record highs.

The price of gas at the Dutch TTF hub, which is a reference for Europe, has nearly tripled since the beginning of the year due to the slowdown in Russian gas deliveries through Nord Stream 1 and a tight global market. This has made bulk gas purchases expensive.

It is estimated that a hypothetical replacement of Nord Stream 1 during the winter with gas from other sources, based on futures prices at TTF for the winter season, would cost Europe more than 50 billion euros, about 10 times higher than the average price of previous years.