Gazprom stops gas injection into European UGS facilities, prices take hold above $500/thousand cubic meters
MOSCOW. Aug 4 (Interfax) - Gazprom has essentially stopped gas injection into underground gas storage (UGS) storage facilities in Europe. The reduction in deliveries began last week and reached its conclusion on Monday.
According to data from Gas Infrastructure Europe, the sum of injection and offtake operations from storage facilities in northwest Europe used by Gazprom even went slightly negative during the day on August 2.
Injection into the Bergermeer storage facility in the Netherlands and Rehden in Germany was stopped and offtake from the Haidach storage facility in Austria began. At the same time, injections into the Katharina and Jemgum UGS facilities in Germany continued.
Gas supplies via the Yamal-Europe pipeline (which runs through Belarus and Poland to Germany) are also being cut. If 84 million cubic meters (at the entrance to Germany) was pumped through last Friday, then on Tuesday, flow drops below 50 million cubic meters.
After a cold winter and record gas offtake from Russian UGS facilities (almost 61 billion cubic meters), Gazprom must inject the same amount of gas into storage facilities. They are emptied everywhere, including Europe, but filling Russian storage facilities is an absolute priority for the company. And although the need for gas injection into UGS facilities in 2021 exceeds 2019 figures by 16 billion cubic meters, the gas production plan for 2021 in the area of the Unified Gas Supply System is not higher, but slightly lower than in 2019.
Data on the level of reserves in Russian UGS facilities are not published as systematically and promptly as they are with respect to storage facilities in Europe.
The European gas balance is currently in an acute shortage. The task of restoring reserves after the cold winter is complicated by the lack of LNG on the world market. As a result, prices on the European market exceeded $500 per thousand cubic meters last week. Prices were above $500 this week: the day-ahead contract at the TTF hub in the Netherlands closed at $517 on Monday, and $505 per 1,000 cu. m. on Tuesday.
Europe's natural gas storage capacity at the end of the August 2 gas day was 57.54% full, 16.2 percentage points lower than the average for the past five years. Besides the shortage of gas resources on the market, the price is also restricting gas supplies. At prices above $500 per thousand cubic meters it seems unprofitable to pump gas into storage facilities.
Since the beginning of the year, the day-ahead TTF contract is already averaging $299 per thousand cubic meters. More than 80% of Gazprom's sales to Europe are now made on spot indices on various time bases - from one month ahead to one year ahead. The observed price level will not have an immediate effect on the company's contract prices, but in the future, it will support them in case of their correction.
The company's budget for 2021 assumes an average export price of $170 per thousand cubic meters of gas to the non-FSU. Gazprom recently raised its estimate of the average price of its exports to the non-FSU in 2021 to $240.