EU institutions reach deal over minimum gas storage obligations

EU institutions agreed on May 19 to a provisional deal on the introduction of gas storage obligations following a trilogue between the European Commission, EU Council and European Parliament.

The negotiations began on May 17 and an informal deal was reached early May 19, with the Council and Parliament agreeing to impose targets on achieving minimum stock levels.

The EC had proposed in late March that member states fill their storage sites to 80% of capacity by Nov. 1, 2022, and to 90% of capacity by Nov. 1 in subsequent years, with intermediary targets set throughout the year.

The proposal was backed by the Council and Parliament, with formal approval from both now required for the new regulation to come into effect.

"We have a swift political agreement on our gas storage proposal," the EU's energy commissioner Kadri Simson said on Twitter. "[We are] really happy to see eye to eye with the [...] Council of the EU and the European Parliament," Simson said.

"This proposal is key to ensure preparedness for next winter. The EU can deliver at speed and is united," she said.

The EU Council said in a statement May 19 that the proposed regulation aimed to ensure that storage capacities in the EU were filled before the winter season and could be shared between member states "in a spirit of solidarity."

It said the co-legislators agreed that underground gas storage sites should be filled to at least 80% of their capacity before the winter of 2022/2023 and to 90% before the following winter periods.

"The Union will attempt collectively to fill 85% of the underground gas storage capacity in 2022," it said.

EU stocks were built to just 77% of capacity in October 2021 and were drawn down to 25% of capacity by the end of winter in March, according to data from Gas Infrastructure Europe (GIE).

EU gas storage sites were 41% full as of May 17, according to the GIE, as injections begin to pick up pace.

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

The TTF month-ahead price reached a record Eur212.15/MWh on March 8, according to Platts price assessments by S&P Global Commodity Insights, and was last assessed at Eur93.10/MWh May 18, still 257% higher year on year.

Demand limit

There had been calls for more flexibility in the new storage rules, with industry officials arguing that the imposition of strict targets could see prices rise further as member states all look to fill sites to specific levels at specific times of year.

The Council said that the filling obligation would be limited to a volume of 35% of the annual gas consumption of member states over the past five years in order to avoid a disproportionate impact on certain member states with significant storage capacity.

Germany, for example, has a working gas storage capacity of 237 TWh (22.5 Bcm), according to data from Gas Infrastructure Europe, which represents around 25% of German annual gas demand.

By comparison, Belgium has a storage capacity of 9 TWh, representing just 5% of annual consumption and making it much easier to fill.

To help member states achieve the new targets, the provisional EU agreement also stipulates that member states can count stocks of LNG or alternative fuels stored at the facilities.

And as not all member states have storage facilities on their territory, the co-legislators agreed that member states without storage facilities would have access to gas storage reserves in other member states.

"In order to share the financial burden of filling obligations, member states without underground storage facilities will use storage capacity corresponding to 15% of their annual gas consumption over the past five years," it said.

As an alternative, member states can also organize the establishment of an alternative burden-sharing mechanism.

The co-legislators also decided on a "filling trajectory" system, which will allow continuous monitoring throughout the filling season, the Council said.

"In 2022, the trajectories will be set in the regulation with a margin of flexibility of 5%," it said.

From 2023 onwards, the trajectories will be proposed by the member states and established by implementing acts adopted by the EC.

In a separate statement, the Parliament said May 19 it had pushed for more ambition on refilling targets and trajectories, and that member states and operators should "strive" to reach 85% fullness levels this year.

Under the agreement, the EC is also set to issue guidance on how to use a mechanism to jointly procure gas, to be activated voluntarily by two or more member states, by August.

Storage certification

The Council and the Parliament also agreed on the compulsory certification of all storage system operators to avoid the potential risks of "external influence" on critical storage infrastructure.

"The certification will prioritize larger storage facilities and storage facilities, which have recently been filled to consistently low levels," it said.

This is likely a reference to those sites that were formerly owned by Russia's Gazprom, such as Rehden in Germany and Haidach in Austria, which were left close to empty last winter.

The Parliament said MEPs had pushed for the certification phase to be as short as possible and that member states would have to publish the draft certification decisions by November 2022.

"Operators who fail to secure this certification will have to give up ownership or control of EU gas storage facilities. Moreover, operators will not be able to close a gas storage facility without authorization from the national regulator," it said.

MEP Jerzy Buzek -- who led the Parliament's negotiating team -- said the compromise agreement meant there would be "full gas storages for winter instead of gas shortages."

Buzek said a "fast-track" procedure would follow. "Extraordinary times demand extraordinary speed and efficiency. We delivered on both," he said.