Europe likely to reach winter gas storage target ahead of deadline, Rystad says

Production constraints in Norway have resulted in higher natural gas prices

A regasification plant in Barcelona, Spain. AFP

Europe is “likely” to reach its 90 per cent gas storage target far before the November 1 deadline, Rystad Energy has said.

As of June 25, European gas storage sites are about 76 per cent full, up from 56 per cent in the same period last year, the Norway-based consultancy said.

“Considering historical demand, and assuming different supply scenarios, storage facilities could even be full ahead of winter this year, resulting in gas flows having to be diverted elsewhere,” said Lu Ming Pang, a senior analyst at Rystad.

The EU set gas storage targets last year after Russia slashed its exports to the region in response to economic sanctions levied due to Moscow's invasion of Ukraine.

After banning imports of Russian crude oil and refined products and sharply reducing gas transported though pipelines, the EU is now considering halting shipments of liquefied natural gas from the country.

Rising LNG imports from the US and Gulf countries have helped Europe to replace Russian supplies.

Global LNG trade hit a high of $450 billion in 2022 as Europe scrambled to secure supplies to replace Russian gas, according to the International Energy Agency.

Despite a rise in demand, LNG supply grew by only 5.5 per cent last year, mostly due to maintenance at large export terminals and the closure of Freeport LNG’s Texas-based plant – one of the world’s largest export centres of the supercooled fuel – after a fire in June 2022.

Meanwhile, European natural gas prices have been volatile this week following an attempted mutiny in Russia.

Dutch Title Transfer Facility (TTF) gas futures, the benchmark European contract, was last trading at nearly €34 ($37) per megawatt hour on Wednesday.

On Saturday, Russian mercenary forces, the Wagner Group, withdrew from the southern Russian city of Rostov-on-Don and halted their march on Moscow following a deal, ending what could have been the first coup attempt in the country for three decades.

Russian President Vladimir Putin said “devastating consequences” had been avoided after the mutiny ended as abruptly as it started.

“Despite the quick resolution, increased geopolitical risk remains with fears that prices could escalate if there is any impact on Russia’s remaining gas pipeline flows through Ukraine,” Mr Pang said.

Natural gas prices have soared about 38 per cent since the beginning of the month, in part due to production outages in Norway.

Norwegian gas flows stood at about 232 million cubic metres per day (MMcmd) on June 26, lower than the 256 MMcmd recorded on June 19, Rystad Energy said.

Ongoing maintenance at Norway's Oseberg natural gas field, which was expected to be completed on June 27, has been extended to July 5.

The Scandinavian country exported more than 120 billion cubic metres (bcm) of gas in 2022, mainly through pipelines, making it Europe's largest gas supplier.