Vulcan Insight | EU proposes joint gas purchases and minimum storage quotas

The European Commission continues to take rapid steps towards ending its vulnerable overreliance on Russian energy imports, particularly regarding gas. Following on the heels of the Commission’s REPowerEU Communication and the Versailles Declaration, the Commission this week proposed new measures for joint EU purchases of gas and minimum storage quotas.

The aim, according to Energy Commissioner Kadri Simson, is to provide “swift action to ensure our energy supply for next winter, and to alleviate the pressure of high energy bills on our citizens and businesses.” As it turns out, while Russia’s semi-state gas company Gazprom continues to deliver gas to European countries as per its contracts, it appears that it failed to replenish gas storage tanks during last summer. In fact, Europe’s largest underground gas storage in Northern Germany, which is operated by Gazprom, is practically empty.

While EU Member States could deal with the depleted gas levels for the time-being and even bridge summer with them, there is urgent need to provide energy supply and security for the coming winter.

As a result, the Commission’s new proposal aims to mandate a minimum 80% gas storage level obligation by 1 November 2022, rising to 90% for the following years. Strategic annual intermediate targets will also be mandated for the period between February to October to ensure key refilling milestones are hit. While such strategic reserve requirements had already been in place for oil, so far, they didn’t exist for gas – be it natural gas, liquified natural gas, or biogas.

To counteract the state of play where one, non-European company has an outsize influence over Europe’s gas supply, the Commission’s package of proposals also puts forward a new mandatory certification of all storage system operators to ensure that non-certified operators will have to give up ownership or control of EU gas storage facilities.

In a potential step forward for further EU-wide integration in the energy market, as requested by a number of Southern European countries, the Commission committed its readiness to create a Task Force on common gas purchases.

Taking on both the positive and negative experiences of the EU’s joint procurement of COVID-19 vaccines, the Task Force would facilitate the EU’s international outreach to suppliers to help secure well-priced imports ahead of next winter.

In coordination with the individual Member States, the Commission would hold talks with international gas suppliers, and would also prepare the ground for future energy partnerships with key suppliers.

Compliments of Vulcan Consulting – a member of the EACCNY.