Western companies are using Ukrainian natural gas storages. A risky convenience
Despite the risks of potential war-related shocks, international traders have begun to re-stock natural gas at storage sites in Ukraine, taking advantage of the lower costs and high available storage capacity.
Benchmark natural gas prices in Europe are lower for the summer months than for the winter of 2023/2024, making storage worthwhile for traders willing to risk holding the gas in Ukrainian storage. Some natural gas traders and energy groups in Eastern Europe already hold natural gas in Ukraine and are comfortable doing so, executives told Reuters .
The Ukrainian storage systems are still connected to the network created to import gas from Russia, even if it is not certain that the transit contract concluded at the time with Gazprom will be renewed beyond 2024 .
The goods can be bought anywhere and sent to Ukraine by reverse flows in gas pipelines from Hungary, Slovakia and Poland. These are the same pipelines that carry residual Russian natural gas to Europe.
EP Commodities, part of the Czech energy group EPH, is one such company. Another company operating near Ukraine, Slovak state-owned SPP, is also seeking opportunities to store natural gas in Ukraine, the company told Reuters.
“We consider gas storage in Ukraine as one of the interesting business opportunities we are currently evaluating.”
SPP supplies most of the gas on the market to Slovakia, including some of the Russian gas that still flows through a pipeline through Ukraine.
Despite the risks of a Russian invasion of Ukraine and the possibility of a direct hit or deliberate attack on Ukraine's gas infrastructure, some companies believe the risk is worth taking: Storage costs are lower and capacity is available. Here is a map with the main storages.
September front-month futures on the TTF hub, a reference point for gas trading in Europe, settled at 37 euros per megawatt-hour (MWh) on the August 10 trading day. futures for the first quarter of 2024, while in the last mild reverse they were at around 50 euros per MWh
For traders expecting higher gas prices in Europe next winter, Ukraine is a good bet for storage sites, especially as storage in the EU is filling up and is very close to reaching – well ahead of schedule. – the target of 90% by 1 November.
Unlike the previous two years, gas storage levels in the EU are elevated, much higher than the five-year average and levels for the same period last year, easing concerns about gas supplies in Europe.
The EU has set a goal of reaching 90% full gas storage by 1 November 2023. Not only will it reach that goal ahead of schedule, it could also fill its storage tanks to 100% by the start of September, according to Morgan Stanley.
EU gas storage sites were 87.7% full as of Aug. 7, according to data from Gas Infrastructure Europe . Ukraine's storage, on the other hand, was 26.6% full.
With EU storage nearly full, Ukraine's available capacity could help the bloc ease gas supply worries ahead of winter, Brussels-based think tank Bruegel said in an analysis this month. last.
Storage of Ukrainian gas could help Europe's security of supply, as the EU can use spare capacity in Ukraine to boost stored gas volumes for next winter, Bruegel said.
There are risks to storage, of course, war risks being the greatest, but Ukraine's available storage capacity in terms of volume currently exceeds unfilled storage capacity in the EU, according to the think tank.
"Using this capacity would increase EU storage capacity by around 10 per cent," wrote Ben McWilliams and Georg Zachmann, authors of the analysis.
“Ukrainian storage could be an option for gas in October, resulting in the EU entering winter 2023-24 in a more comfortable position,” Bruegel's colleagues said.
Ukraine has 100 TWh capacity available for natural gas storage. If the EU uses it or any part of it, it will "provide a nice boost to Europe's winter prospects and a welcome boost to Ukraine's revenues".
If it seems difficult for Russia to hit the gas transit network from Ukraine to Europe, also because it is the same one still used by Gazprom, it is more probable that it will attempt a targeted strike, with ad hoc munitions, at the storage facilities, also because the result of a good missile would be the increase in international gas prices, the very product that Russia exports in abundance.
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The article Western companies are using Ukrainian natural gas storages. A risky convenience comes from Scenari Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/le-societa-occidentali-stanno-usando-gli-stoccaggi-ucraini-di-gas-naturale-una-convenienza-rischiosa/ on Thu, 10 Aug 2023 10:30:59 +0000.