Difficult-to-fill storage tanks: Moscow puts even more pressure on the gas industry

memory difficult to fill
Moscow puts even more pressure on the gas industry

By Nils Kreimeier and Thomas Steinmann

According to a new law, German gas storage facilities must reach minimum filling levels by certain dates. But Russia and its attack on Ukraine constantly present operators with new challenges.

Russia’s announcement to impose sanctions on the former subsidiaries of the energy group Gazprom has caused an outcry in the already battered German gas industry. On Thursday, the Moscow government released a list of 31 companies with which Russian companies will soon be barred from doing business – including Gazprom subsidiary Gazprom Germania. Gazprom Germania has been held in trust by the Federal Network Agency since early April due to the attack on Ukraine, but formally it still belongs to Gazprom.

The industry had previously been disturbed by reports that less natural gas was flowing west through Ukrainian transit pipelines due to the war and that, for the first time, gas transportation was also directly affected by the Russian attack. The reason is that the Soyuz gas pipeline, one of the central supply lines, passes through the disputed Luhansk region in eastern Ukraine, which is partly controlled by pro-Russian units.

Moscow’s new decision could complicate an important project with which the energy industry in Germany has been struggling for several weeks: according to the new law on gas storage levels adopted in early April, operators of German storage facilities must demonstrate minimum levels on some of the key dates to ensure security of natural gas supply. In the future, for example, an 80% fill level will be required by October 1 and even a 90% fill level by November 1. According to European Commission plans, states must fill their gas storage facilities to 80% capacity by November 1, 2022.

The storage operation is no longer a private matter

The law is also a reaction to the situation in the months before the Russian attack, when gas volumes at some storage facilities were well below average. This mainly affected factories that were under the control of the now-sanctioned Gazprom Germania, including Germany’s largest natural gas storage facility in Rehden, Lower Saxony.

Basically, storage operation was more or less a private matter, now the authorities have a say at a central point. “The state is suddenly playing a much bigger role in the gas market,” says Matthias Lang, energy law expert at law firm Bird & Bird, which is closely involved in the implementation of the new law. “Previously, gas storage was essentially organized under private law. Now, a state element has been installed.”

If the storage facility cannot be filled as needed because users are simply injecting too little gas, then the so-called market area manager must intervene. In Germany, it is the company Trading Hub Europe which, in consultation with the Federal Ministry of Economics, must then procure the missing quantities on the gas market – at the expense of the general public. In fact, the state is involved in supply, which is also involved in withdrawal, i.e. the question of when and how much natural gas is injected into the German grid from storage facilities .

In 2021, more than half came from Russia

In theory, Russia’s new sanctions would prohibit Gazprom Germania from supplying Russian gas and therefore also from filling its storage facilities – although this would probably be difficult to implement in practice. “Whoever is allowed to store and withdraw what in Germany does not decide according to Russian law,” says Lang. “But if the gas is no longer physically available, of course it cannot be stored either.” In other words: as long as natural gas is still flowing, Russian sanctions are basically only effective on paper.

In the event of an actual shutdown of Russian gas supplies, however, only a handful of countries in Europe could fill their gas storage facilities by the next heating season, as required by the European Commission. This is apparent from a report on the energy supply situation of the Federal Network Agency and the Federal Ministry of Economics from the beginning of May, which is available to “Capital”. According to the newspaper, if deliveries were stopped in time, only Belgium, France, Spain, Portugal and Great Britain would be able to fill their storage facilities to 100% by the end of the month. summer. Three other countries could reach a level between 30 and 60%. This concerns the Netherlands, Germany and Italy. Above all, the countries of Central and Eastern Europe would miss the targets by far.

Last year, Germany covered more than 50% of its gas needs from Russia. Federal Economics Minister Robert Habeck of the Greens has been working for weeks to reduce the Russian share as quickly as possible. To this end, floating LNG terminals must be built on the German coasts from next winter.

According to the report at the end of the summer, only between 382 and 690 terawatt hours of the European storage capacities of 1100 terawatt hours could be stored. This is mainly due to the fact that the Netherlands, Germany and Italy, which together hold around half of the storage capacity, have only been able to reach a filling level of 60% at best. Western European countries have just under 200 terawatt hours of storage space.

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The figures in the report are based on the scenario of a delivery stoppage in April. Since then, the filling levels of German storage facilities have increased by a few percentage points. Recently, however, Russian gas giant Gazprom halted deliveries to Poland and Bulgaria because the two countries failed to agree to new payment terms for gas deliveries. The Russian side requires the contracting parties to open two accounts with Gazprombank so that payments in euros or dollars can be converted into rubles there. A few weeks ago, President Vladimir Putin decreed that, unlike most supply contracts, invoices had to be paid in roubles.

According to experts, however, the two-account model would violate EU sanctions against the Russian central bank because the ruble exchange would go through the central bank. This raises the question of how German energy companies will pay their bills to Gazprom at the end of May – and whether the dispute will escalate afterward.

This text was first published by “Capital”.

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