European traders began to store natural gas in Ukrainian storage facilities, despite the risks associated with the war.
This was reported to Reuters by three traders and company representatives.
After the start of Russiaʼs full-scale war in Ukraine, the European Union sought to increase gas storage to compensate for reduced supplies from the Russian Federation, especially during peak demand in the winter. The EU plans to fill its storage facilities by 90% by November 1. The block is expected to achieve this goal.
According to traders, there is a commercial logic for gas storage in Ukraine, not only in the EU. They want to take advantage of lower prices now, not future deliveries. The price of gas for delivery in September is €30 per MWh. Prices for the first quarter of 2024 are forecast at €49.
The Czech group EPH stated that the decision to use Ukrainian storage facilities is also a sign of trust in Ukraine.
"We believe in the reliability of gas transportation and storage systems in Ukraine, which have proven themselves even in such an extremely difficult wartime environment," the company noted. The volumes of gas stored in Ukraine were not specified.
According to the GIE transparency platform, on August 7, storage facilities in EU countries were filled with gas by 87%. Naftogaz stated that foreign clients can use more than 10 billion cubic meters of Ukrainian storage facilities, mainly in the west of the country.
Slovak state-owned company SPP, which works with most of the market in the country, said it was considering using Ukrainian storage facilities, as Slovakian ones are already 90% full.
"We consider gas storage in Ukraine as one of the interesting business opportunities," SPP stated.
Other European traders talked about possible risks due to possible strikes by Russia. They are also concerned about what will happen to the network if Russia stops pumping gas through Ukraine.
"Imagine that a well-aimed missile hit a compressor station or some other infrastructure. You have to accept this risk," said the head of the trade department of the Czech firm MND.
Last month, the Bruegel think tank said that Ukraine could increase Europeʼs storage by about 10%.
"Using the additional capacity of 100 TWh available in Ukraine will provide a good boost to Europeʼs winter prospects and a long-awaited increase in Ukraineʼs income," Bruegel noted.
- 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.