Despite the risks of war, energy firms are storing growing volumes of natural gas in Ukraine’s storage facilities as the EU’s sites are nearing capacity, the Financial Times reports.
Gas storage sites across the EU are now more than 99% full, according to data from Gas Infrastructure Europe. The European Union hit its target to have storage 90% full by November 1 months in advance.
Despite the high levels of storage, supply risks still exist. Analysts have been warning that neither Europe nor Asia should be complacent about winter gas supply as prolonged colder winter weather, delivery disruptions, and geopolitical tensions could upend the LNG market once again and send prices soaring.
This year, despite risks of potential hits due to the war, traders have started to store natural gas at storage sites in Ukraine, taking advantage of the lower costs and high available storage capacity. The commodity can be bought anywhere and sent to Ukraine via reverse flows in pipelines from Hungary, Slovakia, and Poland.
With the EU storage nearly full, Ukraine’s available capacity could help the bloc ease gas supply concerns ahead of the winter, Brussels-based think tank Bruegel said in an analysis in July.
Ukrainian gas storage could help Europe’s security of supply, as the EU can use spare capacity in Ukraine to top up stored gas volumes for the coming winter, Bruegel said.
Last week, Ukraine’s Prime Minister Denys Shmyhal said that the country is ready to allow non-resident traders to use up to half of its natural gas storage capacity. Ukraine has 30 billion cubic meters (bcm) of underground storage capacity. As much as 12 to 15 bcm of this capacity could be allowed to be used by foreign traders to store gas, according to the prime minister.
LNG supply to Europe is currently stable ahead of the winter months, but supply risks and long cold snaps in Europe and Asia could quickly draw down the EU storage, tighten the gas market, and result in fresh price spikes, analysts say.