MNI INTERVIEW: Russian Gas Key Despite Euro Storage Build Up

Interruptions to Russian gas supplies and a cold winter would push up European energy prices fast despite diversification towards other producers and a build up in the continent’s storage towards 90% capacity by September from 82% now, Michael Schmoltzer, Chair of Hydrogen Regulatory Taskforce at Gas Infrastructure Europe, told MNI.

Europe escaped lightly last winter thanks to mild weather cutting demand by 20%, allowing the gas industry to finish the cold season with storage at 55% capacity, compared with normal levels around 10-30%, Schmoltzer said.

“We will need full storage especially if there is a cold winter or a normal winter together with Russian supply disruptions,“ he said in an interview.

While current Russian supply is only around 2-3% of total EU total supply, interruptions would still impact prices if next winter is cold.

NEED TO REACH 100% STORAGE

“That is why it is so important that we reach up to 100% of the filling-up level ahead of this winter, especially to overcome this special scenario of a very cold winter and a disruption of remaining Russian supplies,“ he said.

“We would see price increases which would narrow the summer-winter spread and that would reduce the incentives for our customers to fill up storage and, together with a cold winter, this would empty our storage by the end of next winter.”

The timing of any cold snap will be crucial, Schmoltzer said. Recent years have seen cold snaps at the beginning of February and at the end of March or beginning of April. If storage is below full peak demand cannot be met due to low pressure in the system.

“That is why we need to fill up also in the second half of the winter. So, we need around 40% in February on average so there is enough capacity available if we have a cold snap, say in March or April,“ he said.