Bloomberg: The EU wants to store gas in Ukraineʼs underground storage to prevent an energy crisis

The European Union (EU) is considering the possibility of storing gas in the Bilche-Volitsko-Ugerske underground storage facility and other gas storage facilities in Ukraine, when demand and, accordingly, gas prices increase in winter.

Bloomberg writes about this with reference to European officials.

Currently, gas storage facilities in the EU are more than 70% full, so storing it in Ukraine can prevent a surplus in the coming months. The Bilche-Volitsko-Ugerske storage facility is capable of storing four times more natural gas than the largest storage facility in Germany.

The German energy company RWE AG believes that the use of Ukrainian storage facilities will help balance supply and demand during the second half of the summer of 2023, as they are connected to the EU gas markets. Some gas traders also point out that the risks associated with war may be justified.

And according to Marko Zaalfrank, head of trade operations in continental Europe at the Swiss Axpo, the Ukrainian market offers gas storage at a fixed rate, making "gas storage in Ukraine a very attractive and competitive option."

At the same time, the European Commission is studying whether "guarantees issued by state institutions will facilitate the opening of access to natural gas storage facilities in Ukraine" and how.

In Ukraine, gas storage facilities are located far from the front line at a depth of 2 km underground and contain more than 30 billion cubic meters. A third of them is provided by Ukrtransgaz, which is trying to implement service guarantees to reduce war-related risks in order to become a "power bank for Europe".

In order for gas to be stored in Ukraine to be economically profitable, prices must drop significantly, and the EU must provide protection against war risks.

• Last year, gas prices in Europe rose to record levels, due to the Russian Federationʼs war against Ukraine, sanctions against Russia, and the gradual withdrawal of Russian gas. Then there was panic in the market, which led to government intervention — EU governments allocated almost $700 billion to help companies and consumers. Russia counted on the EUʼs dependence on its energy sources and pressured countries to ease sanctions and not provide aid to Ukraine.
• Due to the sharp increase in the cost of energy carriers caused by the invasion of Russia, Europe lost almost a trillion dollars. EU countries began to refuse Russian gas and oil, and in November of last year Germany admitted that the Nord Stream 2 gas pipeline project contributed to the war in Ukraine.
• In January 2023, Germany announced that it had fully diversified its energy infrastructure after the Russian invasion of Ukraine and was no longer dependent on Russian energy sources.