Top energy executive to EU: stop blaming Russia and fill your gas storage

Politico
from SNAM's cite

The EU should stop blaming its energy crisis on Russia and start buying cheap gas every summer to avoid competing with Asia for pricey liquefied natural gas (LNG) each winter, POLITICO writes citing SNAM's executive Marco Alverà.

"If Europe could build 40 billion cubic meters of strategic storage that we could fill in the summer, we would essentially not need LNG in the winter," said SNAM CEO Marco Alverà. "It increases security, acts as a dampener in case of price rises, and allows Europe to do joint purchasing of gas without interfering in the market."

The initiative could be launched in a matter of months, with either the EU as a whole or several countries jointly asking gas transmission system operators like SNAM to find existing storage or build new capacity, then to launch open auctions when gas is cheapest this summer.

"A lot of the storage already exists, because it's storage that could be filled but traders don't want to fill it," he added. "They say, 'Why should I buy now to store at €70 if maybe next summer there's another COVID variant and it's back to €20?'"

That sort of profit-driven decision-making left the EU unprepared this year and is a mistake that can't afford to be repeated, said Alverà. Especially as the bloc pulls back domestic gas production and Asia increases its appetite.

"There's about a 15 percent drop in EU production over the past three years as the U.K. North Sea production declines and the Groningen gas field in the Netherlands closes. At the same time, China is switching 15 million homes a year from coal to gas ... every two or three years, you're adding a market the size of France." That means more buyers chasing less gas. "This will go on beyond 2040," as global pressure to cut coal use ends up boosting demand for gas, he said.

Speaking from SNAM headquarters in Milan, Alverà noted that Italy is currently an outlier in the bloc-wide energy crisis thanks to its mandatory strategic gas reserve of 4.5 billion cubic meters, which can be released in emergencies at the government's discretion.

 

That underground insurance policy — coupled with a steady flow of Azerbaijani gas through the Trans-Adriatic Pipeline secured via long-term contracts — has allowed Italy to pay less for energy imports and even export surplus gas to ailing neighbors in 2021.

 

In contrast, EU officials are scrambling to secure last-minute gas from producing countries like the U.S. and Qatar this winter — and offering Asia extra cash to nab some of its already-purchased LNG cargoes, as bloc-wide storage hits historic lows.

Alverà batted away any notion that the bloc's supply-crunch woes were due to Moscow steadily closing the gas spigot — a refrain often heard in Brussels. Gazprom says it is fulfilling its long-term contracts, but it hasn't sent much additional gas to the EU.

"Gazprom has not run auctions to sell spot volumes on top of its [existing contracts], but these are a small part of the market," he said. Reports of reduced pipeline flows in January, he added were due to Gazprom clients not ordering more gas in reaction to the December price spike, when the European benchmark TTF hub briefly cracked an eye-watering record high of €188 per megawatt-hour.

Despite the current crunch, he predicted that prices will steady thanks to a mild winter. If there is no massive freeze in March — "a big Beast from the east" — then "we'll make it through" to summer, he said. "If we can get to March, it's going to look better next winter."

© Photo :from SNAM's cite
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