Gas storage in Europe reaches a record level

Europe finds itself in an unusual situation as gas storage levels reach record highs. While the headlines may suggest abundant energy security, there is more to the story than meets the eye. Focusing primarily on “gas storage,” let’s delve into the complexities beneath the surface and why winter concerns still persist across the continent.

The European LNG boom: a false sense of security

Earlier this week, Chevron was reported to be in talks over LNG shipments bound for the European Union, focusing on contract terms spanning 15 years. This news follows a series of long-term agreements between European energy companies and Qatar, one of the world’s largest LNG exporters. Germany, in particular, has embraced this trend, having established three floating LNG import terminals last year, with intentions to build three more. The European Union, as the largest importer of US LNG, is proud to say that gas storage is almost at 100% capacity.

However, this apparent assurance is misleading, as “UK gas storage” remains a major concern. Significant investments in LNG infrastructure have not translated into a guarantee of uninterrupted supply in winter, raising further questions about Europe’s readiness for the energy transition.

Gas storage deficit: a persistent challenge

European countries have been storing more and more gas in Ukraine as their own storage caverns fill with regasified LNG purchased earlier this year. The imminent arrival of almost 30 LNG tankers, including three Russian vessels, contradicts the EU’s statements on reducing dependence on Russian hydrocarbons. These actions underline the fact that Europe’s efforts to reduce dependence on hydrocarbons have not yet borne fruit despite heavy investments in wind and solar energy.

The central problem lies in Europe’s limited gas storage capacity, which is unable to sustain winter demand even at full capacity. This situation requires continued gas imports, emphasizing the current challenges related to gas storage in Europe.

The paradox of total storage and winter insecurity

Gas storage in Europe is currently at a record level, which under normal circumstances would be cause for celebration. However, the paradox is that even 100% storage capacity does not guarantee uninterrupted supply during winter. No member of the European Union has sufficient storage capacity to meet 100% of its demand for a significant period. This shortfall underscores the need to continue importing gas to close the gap, even when storage capacity is at its maximum.

This problem is exemplified by the EU’s decision to store gas in Ukraine despite the potential risks associated with war-related disruptions or storage losses. Furthermore, recent calls by Germany’s electricity market regulator to curb consumption further highlight the challenges of ensuring adequate supply during the winter, regardless of the amount of gas stored.

The rigidity of the global LNG market and Europe’s dilemma

The global LNG market shortage is a major factor contributing to winter concerns in Europe. This tightness has been exacerbated by Europe’s transition from Russian pipeline gas to LNG, with more than 100 billion cubic meters of Russian pipeline gas no longer available. Previous statements that the EU could do without Russian gas have proven premature. The idea that the EU could rely solely on wind, solar, nuclear and hydropower, possibly with some hydrogen, also appears to be an impractical ambition.

This is evident in the long-term LNG supply agreements with Qatar, each spanning 27 years. While the EU is aiming for net zero emissions by 2050, the reality is that achieving full gas independence is an uphill battle, and these long contracts indicate an awareness of the challenges ahead.

Overbuilding of LNG import capacity and future projections

In light of its ambitious goals, the EU may be overextending itself. According to the Institute of Energy Economics and Financial Analysis (IEEFA), the EU is currently overstretching its LNG import capacity. The recent IEEFA report highlights that since the beginning of 2022, 36.5 billion cubic meters of new LNG import capacity have been added. LNG consumption alone has increased by 4.8 billion cubic meters since the beginning of 2023 after a substantial increase last year.

The projection that import capacity will expand to 406 billion cubic meters by 2030, while gas demand is expected to decline to 400 billion cubic meters over the same period, is raising concerns. High LNG prices can naturally limit demand in Europe and have implications for economic growth, reminding Europe of its dependence on affordable and reliable energy.

The paradox of gas storage and the coming winter

Record levels of gas storage in Europe offer a deceptive sense of security. The EU’s inability to ensure uninterrupted supply during the winter is a critical concern, mainly due to limited storage capacity and the challenges of the energy transition. The continent’s heavy dependence on LNG imports and over-building of LNG infrastructure create further complexities in addressing this issue.

As “gas storage” remains at the forefront of Europe’s energy challenges, it is clear that the EU’s path to energy independence and a smooth transition to cleaner alternatives is fraught with difficulties. Winter worries persist and the continent must navigate the fine line between ambition and practicality to achieve its energy goals. Europe’s gas storage situation may be at a record high, but the road ahead remains perilous.