Russia Supply Reduction via Nord Stream Poses Risks to Gas Storage in Europe

Source: www.gulfoilandgas.com 6/17/2022, Location: Asia

Russia reducing flows via Nord Stream, outages at Freeport and French nuclear downgrades have sent the European natural gas market into an upward spiral with more volatility still to come. And while summer consumption will be covered, analysts at Wood Mackenzie, a Verisk business (VRSK) say storage refill is at risk unless additional demand and supply measures are taken.

Kateryna Filippenko, principal analyst, global gas research for Wood Mackenzie said: “The uncertainty is high. Freeport and French nuclear downgrades offer some degree of predictability, but Gazprom’s supply into Europe is the biggest unknown. If Gazprom restarts flows via Nord Stream at full capacity, although we believe this is unlikely, and Russian flows are at contracted levels, Europe would theoretically still be able to refill the storage to the 80% target by 1 November – even with Freeport outages and nuclear downgrades.”

But if Nord Stream continues flows at 45% capacity or if it stops altogether, Europe will only be able to refill storage partially – to 69% and 60% respectively, which is considerably lower than the five-year range for European gas storage.

“If Gazprom continues restricting flows, in both cases storage will runout throughout winter unless other demand or supply measures are taken, or Gazprom sends additional gas via available booked capacity via Ukraine, although we believe this is very unlikely,” Filippenko said.

In Europe, additional demand measures could include further energy saving measures and fuel switching. From the supply side, measures could consist of increasing production at Groningen in the Netherlands, and additional Norwegian and Algerian gas – although their impact will be limited.

High prices resulting from the restrictions will inevitably lead to a reduction of Asian gas demand, freeing up some LNG for Europe – although limited regas capacity in continental northwest Europe will limit upside, something the industry has already observed in recent months. Any Nord Stream reductions will increase prices further, inevitably leading to more demand reduction in both Asia and Europe.

“The situation is evolving rapidly, and Europe may end up in a world without Russian gas sooner than expected and therefore preparations need to start now,” Filippenko concluded.


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