We have barely had spring weather before the gas market is already under the spell of the coming winter. How full are the storage facilities, can Europe get its hands on enough LNG and what is Norway doing? Gazprom cannot resist firing a little extra on the European gas market.
The gas quotation on the TTF excels in stability. The price is below €40 per MWh. One day the price goes up a little and the next day it goes down a little, but the real volatility is a bit gone at the moment. Yesterday (Tuesday April 18) the TTF closed at €42,40 per MWh. In the longer term, there is more uncertainty in the gas price. For example, the February 2024 contract stands at €59,18 on the TTF. If we look further ahead, the contracts for the winter of 2024/25 are also close to €60 per MWh. It should be noted that there is not yet much trade in these contracts.
What is becoming clear on the futures market is that players are not yet convinced that Europe can fully compensate for the largely lost Russian gas supplies by attracting gas from other suppliers. At the moment, the supply of LNG to the EU is going well. The average fill rate in the EU is approximately 56%, with Spain as the leader with a fill rate of approximately 85%. The fact that Spain is so far ahead does not come as a complete surprise to analysts. Due to the lack of direct pipelines from Russia, this country already relied heavily on the supply of LNG.
Russia is stirring
The Russian state gas company Gazprom cannot resist further emphasizing the weak position of the EU on the gas market. According to Gazprom, Europe has 56,6 billion cubic meters of gas in storage as of April 16. That is less than on the same date in 2020 (the period in which corona spread wildly in Europe) when the stock was 58 billion cubic meters. Last winter, the EU had luck on its side, according to Gazprom, due to the mild temperatures. It is not certain that this will be the case again next winter. Refilling the gas storage facilities 'is not a given' for the European gas companies. "It will be very difficult to obtain sufficient gas due to the politically motivated decision not to supply gas via the Russian pipelines. The volume of gas available for Europe will therefore largely be determined by the competition on the LNG market. It is also not entirely true that gas no longer comes from Russia. According to data from the International Energy Agency, approximately 25 billion cubic meters of Russian gas will probably enter Europe via Ukraine and Turkey this year.
Gazprom's words make sense, according to analysts, but the Kremlin also has a clear self-interest in further increasing gas prices. Last year, the largely loss of sales to Europe was more than compensated by extremely high prices. If the gas price remains a lot lower next winter, Russia will immediately have a hole in the budget. And the Kremlin can't use that. In addition to the suffering caused by the war in Ukraine, it is also an expensive affair financially.
The fact that Gazprom is making itself heard now is also striking on another level. The Austrian-based subsidiary Gazprom Austria GmbH has filed for bankruptcy, the company's lawyer announced on Friday, April 14. The Austrian subsidiary is forced to do this due to the claims filed by the German energy company Uniper for failure to meet delivery obligations. Gazprom invoked force majeure clauses in the contracts, but Uniper did not agree to this. Gazprom Austria GmbH is pursuing a settlement with all parties involved and sees this step as part of a restructuring.
New gas fields
Due to the tightness on the European gas market, Norway is once again investigating the possibilities of extracting oil and gas in the Barents Sea. The Norwegian Ministry of Oil and Energy asked gas infrastructure manager Gassco in March to explore the possibilities for energy extraction in the Barents Sea.
On Monday, Gassco came to the conclusion that a possible new pipeline to the area is worth further investigation in the light of European energy security. Energy companies' interest in developing the oil and gas fields in the Barents Sea has declined in recent years due to high costs. In a study in 2021, Gassco concluded that developing this area would not contribute enough to the Norwegian government treasury. A pipeline is not the only option that Gassco came up with on Monday. Expanding the LNG capacity or making ammonia with CO2 capture are possible.