Despite the risks posed by a full-scale war, European gas traders have started storing natural gas in Ukraine to take advantage of lower prices and available capacity
Reuters reports this with reference to three traders and company representatives.
The agency notes that after the start of Russia’s full-scale invasion of Ukraine, the EU sought to increase gas storage to compensate for the reduction in supplies from Russia, particularly in winter. Thus, the unit is expected to fill its storage facilities by 90% by November 1, 2023.
According to traders, there is a commercial logic in storing natural gas in Ukraine, apart from the EU, which is based on the commercial logic. In particular, it is an opportunity to take advantage of lower prices now compared to future deliveries
In particular, the Czech EPH group told Reuters that the decision to use Ukrainian storage facilities is a sign of trust in the country.
“We believe in the reliability of Ukraine’s gas transportation and storage systems, which have proven themselves even in such an extremely difficult wartime situation,” said EPH head Myroslav Gasco, but did not disclose the volumes.
According to the GIE transparency platform, as of August 7, gas storage facilities in the EU were 87% full.
“We see positive dynamics in gas injection by foreign traders into our storage facilities,” Ukrtransgaz, a part of the Naftogaz group, said.
Naftogaz also noted that foreign customers can use more than 10 billion cubic meters of the country’s storage facilities, which have a capacity of about 30 billion cubic meters. They are located mainly in western Ukraine, away from the front line.
Slovakia’s state-owned SPP, which supplies most of the country’s market with partially Russian gas, said it is considering using Ukrainian storage facilities, as Slovak ones are already 90% full. According to her, they see this as one of the most interesting business opportunities.
Other countries point to the risks posed by a full-scale invasion of Russia. They talk about possible military strikes or what would happen to the grid if Russia stopped pumping the gas it still supplies to the West through Ukraine.
“Imagine a precision-guided missile hitting a compressor station or some other infrastructure. You have to take that risk,” said Martin Pich, head of trading at Czech firm MND.
According to him, the volumes may be small at the moment, but they may increase if spot prices fall.
At the same time, the Bruegel think tank said last month that Ukraine could increase storage capacity in Europe by about 10%. Thus, the use of additional 100 TWh of capacity could improve the prospects for winter in Europe and contribute to the long-awaited increase in Ukraine’s revenues.
Currently, gas for storage in Ukraine can be purchased anywhere and pumped using real or virtual flows through pipelines from Poland, Slovakia, and Hungary. In particular, the nominations of the pipeline transporting Russian gas from Ukraine to Slovakia at the Velke Kapusany border have now been upgraded for virtual reverse flows to Ukraine. At the same time, physical flows from Slovakia to Ukraine also began in August through the Budince border crossing. Daily volumes reach about 17 million cubic meters.
