Gazprom’s low gas reserves raise questions about Russia’s supply to Europe

Gazprom had emptied its natural gas storage facilities in Western Europe to unusually low levels before the winter, which intensified fears that Moscow would intensify supply shortages, pushing prices to record levels.

Although storage levels in Europe are very low, analysis of European gas industry data shows that the biggest shortages occur in locations owned or controlled by Gazprom. Critics increasingly point out that this is to squeeze European energy supply. .

“The biggest deficit is where Gazprom’s facilities are located,” said Domenicantonio De Giorgio, an adjunct professor of finance at the Catholic University of Milan, who analyzed data from the industry body Gas Infrastructure Europe (GIE).

“Putin and Gazprom have always stated that they have provided customers with all long-term contracts. Well, they have supplied their customers, but they have not supplied themselves,” he said.

GIE data shows that in countries where Gazprom has no storage facilities, such as France and Italy, the level of stored natural gas is close to the normal level at this time of the year.

Excluding the sites controlled by Gazprom, European gas storage is only within the five-year average range, which the industry defines as a relatively comfortable location for supply. However, including facilities controlled by Gazprom, the overall level in Europe is well below 75%, and in the past five years, this proportion has been 85% to 95% every year.

Gazprom has an influence on almost one-third of natural gas storage in Germany, Austria and the Netherlands.

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According to data from Gas Infrastructure Europe, the Rehden gas storage facility owned by Gazprom in Germany accounts for nearly one-fifth of the country’s storage capacity, but it was full in October 2019, but it is currently less than 10%.

The Haidach facility in Austria is also operated by Gazprom and is one of the largest underground storage facilities in Central Europe, currently only 20% full.

Russian President Vladimir Putin said on Wednesday that he had told Gazprom to inject more natural gas into its storage facilities in Germany and Austria after completing domestic storage on November 8.

He previously blamed the record-setting natural gas price on European energy companies for not storing enough natural gas underground before winter, and denied that Moscow has restricted supply to Europe.

Putin told Gazprom CEO Alexei Miller: “This will definitely create a favorable situation for the European energy market, or at least a more favorable situation.”

According to diplomats familiar with the discussions, the German Chancellor Angela Merkel (Angela Merkel) told EU leaders last week that Russia has pledged to increase the country’s natural gas storage.

Critics of Gazprom believe that allowing its storage facilities to be reduced is a subtle but very effective effort to affect European energy prices, which is threatening the economic recovery from the coronavirus pandemic.

The natural gas industry has serious disagreements over whether Russia will block supplies from Europe. Russia is accused of doing so to promote the rapid launch of the disputed Beixi 2 pipeline, which will bypass Ukraine and travel directly through the Baltic Sea to Germany.

Many analysts argued at the end of the summer that Russia’s production had reached its limit, and after a long winter last year, it had to move more supplies to domestic storage.

But last week, Gazprom declined to book additional pipeline capacity, which will allow it to increase its supply to Europe next month when Russia’s efforts to fill domestic storage should have been completed​​.

Cuneyt Kazokoglu of Facts Global Energy, a consulting firm, said: “If you asked me last month, I would say that Russia is prioritizing filling its own storage space.” “But their storage is almost full now. Structurally speaking, there seems to be none. What can stop them from supplying more natural gas to Europe, but that is not the case.”

Sebastian Bleschke, head of INES, the German gas storage industry trade agency, said that although European storage is depleted due to the long winter, it is difficult to say why the facilities owned by Gazprom have not been “replenished again” “.

Putin has more publicly linked the approval of Nord Stream 2 to the increased availability of supply. Last week, Gazprom may add another 17.5 billion cubic meters of flow to the pipeline “the next day” after the German regulator approves the pipeline. .

The operator of Nord Stream 2 said last week that the pipeline is full of natural gas and is ready to start operations, indicating that Russia does have natural gas available.

Neither Putin nor Miller stated that the gas stored in Europe will come from additional supplies, which shows that Russia has not changed its position on Beixi 2’s approval.

Due to Putin’s remarks, natural gas futures related to the European natural gas wholesale price TTF fell only 4.5%, indicating that the market believes that Russia has not yet committed to supply more natural gas.

“Earlier in the fall, Russia’s domestic natural gas balance was tight, which may have contributed to the flow of natural gas. [to Europe] Kateryna Filippenko, chief analyst for European Gas Research at Wood Mackenzie, said these prices are modest considering the high prices.

“But now we believe that the supply of natural gas has increased… Gazprom may be ready to supply more natural gas, but only if Nord Stream 2 is approved.”

The German Ministry of Economy said on Tuesday that it has concluded that allowing the new pipeline to start supplying natural gas to Europe will not endanger the energy security of Germany or the European Union. The Ministry’s analysis should now pave the way for Nord Stream 2 to obtain certification from the German Federal Network Agency.

Compared with Eastern European politicians, Western European politicians have been slower to accuse Russia. But in the past two weeks, things have begun to change.

Annalena Baerbock, co-chair of the German Green Party, who is participating in coalition negotiations, said last week that Europe should not succumb to Russia’s “blackmail” in approving the Beixi 2 project, adding that she believes the price spike is “intentionally brought about”. of”.

Additional reporting by Max Seddon in Moscow

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