European gas reserves have never been so low

The Dutch reference price for natural gas (TTF) was included in the last few days 74 euros per megawatt hour, i.e. about 5 times the price in 2020. This year the gas price remained stable for a year at 15 euros/MWh. At the end of last year, the gas price reached a high of 188 euros/MWh.

Price of the Dutch TTF future

Low European gas reserves are driving prices to unprecedented levels. Reserves are typically around 46% at this time of year. Today they make up just 31%. It’s the first time European reserves have fallen below 50% this early in the year. In the past five years, this level has only been reached in mid-February.

Where are the gas reserves from the European Union?

Annual development of European gas reserves (in %)

  • 2022
  • 2021
  • Mean
  • Minimum. and max. 2015-2020

Source: GIE Aggregated Gas Storage Inventory

The problems emerged in spring 2021. At that time, demand rose sharply due to a late cold snap and many countries had to tap into their reserves. They couldn’t replenish them because of the drop in Russian gas imports. It was only in October that the scale of the problem became clear: European winter reserves did not exceed 77% against a historical average of 90%.

The gas crisis is affecting all of Europe, but with significant differences by country. In Belgium, the gas reservoir is located in Loenhout near the Dutch border. Here, natural gas is stored in layers of rock more than a kilometer below the earth’s surface. This underground cavity is now only 22% full, a level comparable to German and French reserves. In the Netherlands, the reserve is only 23% full, compared to 88% in the UK.

Where are the gas reserves in? neighboring countries?

Annual development of gas reserves by country (in %)

  • 2022
  • 2021
  • Mean
  • Minimum. and max. 2015-2020

Source: GIE Aggregated Gas Storage Inventory

But these fill rates don’t tell the whole story. The Loenhout reservoir is relatively limited with a storage capacity of 9 terawatt hours (TWh), which is just under 5% of the country’s annual consumption. In France and Germanythe maximum storage capacity corresponds to almost 25% of the annual consumption. The Dutch filling rate is low, but our northern neighbors can store 16 times more gas than our country.

The reserves of United Kingdom account for only 1% of the average annual consumption. Despite everything, the situation across the English Channel is less serious. The country can meet 40% of domestic demand from its own gas fields in the North Sea. In addition, the country is directly connected to Norway, the world’s third largest gas exporter, allowing for additional supplies.

Due to the small volume of our reserves, our country is much more dependent on imports from neighboring countries. The Belgian gas network is well connected and Belgium has easy access to the international LNG market, which is delivered by ship via the LNG terminal in Zeebrugge (and indirectly Dunkirk). This provides additional security, but due to global shortages, LNG carriers are unable to meet demand.

The sweetness of wintergood news for gas prices

One of the positive factors of the last few weeks is the weather. At the onset of winter nervousness mounted as no one could predict whether our small reserves would be enough to warm us through the winter.

The crisis scenario does not seem to materialize for the time being. The mild temperatures have made it possible to limit consumption, preserving reserves. With the end of January and the weather forecast for mild temperatures in February, the danger of a severe winter seems to have passed.

However, it will be necessary to wait until April to know the evolution of the temperature. This is when gas supplies are usually at their lowest. Around this time last year, Europe also experienced a cold snap, forcing countries to draw on their reserves and enter the filling season with larger deficits. A repetition of this scenario could send prices higher again next winter.

what does Russia?

Climate aside, Russia’s geopolitical games remain the main topic of concern. Europe relies on Russian gas for 40% of its needs. These imports have been running at half-mast since autumn 2021. Gas flows through the Yamal-Europe gas pipeline have been completely halted since mid-December, and transit through Ukrainian gas pipelines has also been reduced. However, Nord Stream 1, the gas pipeline connecting Russia directly to the German market, continues to operate at maximum capacity.

The explanation for the decline in Russian gas supplies was initially sought on the side of increasing Russian domestic demand and an increase in exports to Asia. Putin then made it clear that he would only agree to further gas supplies to the European Union if they gave the green light to the controversial Nord Stream 2 project, which would allow Russia to ship twice as much gas directly to Europe without going through Ukraine.

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