Russia’s Gazprom has emptied its gas storage facilities in western Europe to unusually low levels ahead of the winter, adding to fears that Moscow has exacerbated a shortage of supplies that has boosted prices to a record level.
While European storage levels are low, an analysis of European gas industry data shows the largest shortfalls are at sites owned or controlled by Gazprom, in what critics say increasingly points to an attempt to squeeze European energy supplies.
“The big deficits are where Gazprom facilities are,” said Domenicantonio De Giorgio, adjunct professor of finance at the Università Cattolica del Sacro Cuore in Milan, who has analysed data from Gas Infrastructure Europe (GIE), an industry body.
“Putin and Gazprom keep saying they have supplied all of their long-term contracts with customers. Well, they have supplied their customers, but they have not supplied themselves,” he said.
Data from GIE show that in countries where Gazprom does not own storage facilities, such as in France and Italy, the level of gas in storage has reached near-normal levels for this time of year.
Excluding Gazprom-controlled sites, European gas storage is just within the five-year average range, which the industry defines as a position of relatively comfortable supplies. Include Gazprom-controlled facilities, however, and the overall level in Europe is well below, at just above 75 per cent compared with 85 to 95 per cent in each of the past five years.
Gazprom has influence over almost one-third of all gas storage in Germany, Austria and the Netherlands.
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The Gazprom-owned Rehden natural gas storage facility in Germany, which accounts for almost a fifth of the country’s storage capacity, is less than 10 per cent full, having been full in October 2019, according to Gas Infrastructure Europe data.
The Haidach facility in Austria, also operated by Gazprom and one of the largest underground storage facilities in central Europe, is only 20 per cent full.
Russian president Vladimir Putin said on Wednesday that he had told Gazprom to pump more gas into its storage facilities in Germany and Austria after it finishes filling domestic storage on November 8.
He had previously blamed record gas prices on European energy companies not pumping enough gas into underground storage ahead of the winter and denied that Moscow has restricted supplies to Europe.
“This should certainly create a favorable situation on the European energy market, or at least a more favorable one,” Putin told Gazprom chief executive Alexei Miller.
Putin’s comments come after German chancellor Angela Merkel told EU leaders last week that Russia had committed to increasing its natural gas held in storage in the country, according to diplomats familiar with the discussions.
Critics of Gazprom believe that allowing its storage facilities to decline has amounted to a subtle but highly effective effort to influence European energy prices, which are threatening the economic recovery from the coronavirus pandemic.
The gas industry had been deeply divided over whether Russia has held back supplies from Europe, which it has been accused of doing to push for the quick start-up of the controversial Nord Stream 2 pipeline that will bypass Ukraine to run directly through the Baltic Sea to Germany.
Many analysts argued in late summer that Russian production had been maxed out while it has had to redirect more of its supplies to filling domestic storage after a long winter last year.
But last week Gazprom declined to book the additional pipeline capacity that would allow it to increase supplies to Europe next month — when Russia’s efforts to fill domestic storage should have been completed.
“If you were to ask me last month, I’d have said Russia is prioritising filling their own storage,” said Cuneyt Kazokoglu at Facts Global Energy, a consultancy. “But their storage is almost full now and structurally there seems to be nothing stopping them supplying more gas to Europe, and yet they’re not.”
Sebastian Bleschke, head of INES, a German trade body for the gas storage sector, said that while European storage had been run down by a prolonged winter, it was difficult to say why Gazprom-owned facilities had not “been refilled again”.
Putin has more overtly linked approval for Nord Stream 2 to the availability of increased supplies, last week saying Gazprom could increase flows by an extra 17.5bn cubic metres “the day after” an approval for the pipeline by German regulators.
Nord Stream 2’s operator said last week that the pipeline had been filled with gas in preparation to start operation, in a sign that Russia does have gas available.
Neither Putin nor Miller said the gas being pumped for storage in Europe would come from additional supply volumes, indicating Russia has not shifted its stance on Nord Stream 2 approval.
Gas futures linked to TTF, Europe’s wholesale gas price, fell only 4.5 per cent on Putin’s comments, indicating the market believes Russia has not yet committed to supplying more gas.
“Earlier in autumn, Russia’s tight domestic gas balance could have been the reason why flows [to Europe] were modest considering high prices,” said Kateryna Filippenko, principal analyst, European gas research, at Wood Mackenzie.
“But now we believe the availability of gas has increased . . . Gazprom might be ready to supply more gas, but conditional on Nord Stream 2 getting a green light.”
Germany’s economy ministry said on Tuesday it had come to the conclusion that allowing the new pipeline to start supplying gas to Europe would not endanger Germany’s or the EU’s energy security. The ministry’s analysis should now pave the way for Nord Stream 2 to receive certification by Germany’s Federal Network Agency.
Politicians in western Europe have been slower to point fingers at Russia than their counterparts in eastern Europe. But in the past two weeks that has started to shift.
Annalena Baerbock, the co-chair of the German Green party that is entering coalition talks, last week said Europe should not succumb to “blackmail” from Russia over the approval of Nord Stream 2, adding she believed the surge in prices had been “intentionally brought about”.
Additional reporting by Max Seddon in Moscow