Germany begins 'intensive' work to procure gas for Rehden storage: regulator

Germany has begun "intensive" work to procure large-scale gas volumes for injection into the near-empty Rehden storage site, the country's energy regulator Bundesnetzagentur said May 9.

The Bundesnetzagentur is currently in temporary control of Gazprom Germania -- formerly a wholly-owned subsidiary of Russia's Gazprom -- whose assets included Rehden operator Astora.

Under new German regulations, storage sites need to be filled to 80% of capacity by Oct. 1 and to 90% by Nov. 1.

"In an initial step, relatively small quantities of gas will be injected into storage in Rehden," a Bundesnetzagentur spokesperson told S&P Global Commodity Insights, adding that injections began last week.

"Intensive work is underway to procure larger quantities of gas for this storage facility," the spokesperson said.

"The objective is to meet the storage level requirements of the Gas Storage Act (Gasspeichergesetz), which sets out that the gas storage levels must be 80% on Oct. 1, 90% on Nov. 1 and 40% on Feb. 1."

German gas storage sites are currently just 38% full, according to Gas Infrastructure Europe data.

Rehden -- which has a capacity of some 43.7 TWh (4.1 Bcm) -- was left effectively empty by Gazprom by the end of the past winter.

GIE data show the site had just 0.25 TWh of gas in stock as of May 7, just 0.6% of capacity. However, the data show small injections having started May 8.

Concerns about filling storage sites this summer have contributed to record high prices across Europe in recent months.

The TTF month-ahead price reached a record Eur212.15/MWh March 8, according to Platts price assessments by S&P Global Commodity Insights.

The contract was last assessed on May 6 at Eur99.50/MWh, up by 315% year on year.

With Rehden now under effective state control, Germany will be hoping to bring storage volumes held at the site closer to usual levels.

'No influence'

Astora -- the operator of Rehden -- told S&P Global on May 9 that its responsibility was just as operator of the site.

"Astora is an operator of gas storage facilities and has no influence on customer behavior and levels of working gas volume due to legal requirements," the company said in emailed comments.

"The decision on injection and withdrawal volumes is only up to the customers (including suppliers of gas) who have booked capacities with storage operators," it said.

The Bundesnetzagentur took on the role of Gazprom Germania shareholder at the start of April in order to guarantee Germany's security of supply after Berlin said it had not approved the sale of the unit by Gazprom to a third-party company called Palmary.

The ministry said that Gazprom Germania operated "critical" gas infrastructure in Germany and was therefore of significant importance for the country's gas supply.

Gazprom said on April 1 that it had terminated its participation in Gazprom Germania and all of its assets on March 31, in a move that took the German authorities and the gas market by surprise.

Gazprom Germania was a 100%-owned subsidiary of Gazprom Export, itself a wholly owned unit of Gazprom.

European assets held under the umbrella of Gazprom Germania include trading and storage companies such as London-based Gazprom Marketing & Trading, Switzerland-based Gazprom Schweiz, Germany-based traders WIEH and Wingas , and Astora.

'Challenging' targets

Germany in early March already provided funds to the German THE gas hub to procure LNG to help refill the country's gas storage sites.

However, Germany's gas grid operators in March warned of the "considerable" financial risk of mandating minimum gas storage levels, despite agreeing that it was important to make provisions for next winter.

Officials from German storage operators also said at the Flame conference last week in Amsterdam that it would be challenging to meet the minimum storage obligations.

"I would say this year will be challenging," Hans-Joachim Polk, executive board member at Germany's VNG, said, in reference to meeting the proposed targets.

"We are all in a learning process and we have to see how the mechanism is working," Polk said.

Michael Kohl, managing director at RWE Gas Storage West, said the new requirements had to be implemented within the framework of existing storage contracts.

"That's a huge problem," Kohl said, adding that operators had the right to cancel contracts from July 1.

Then, the trading hub THE would step up to fill the remaining capacity. "The question is: how much can they afford to fill?" he asked, given record high gas prices and low liquidity.

Kohl said that could lead to a situation where the targets cannot be reached.