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    EU backs Dutch gas storage filling scheme


The Netherlands has a fairly long way to go to reach the 80% storage capacity requirement on November 1.

by: NGW

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EU backs Dutch gas storage filling scheme

The European Commission announced on July 12 it was supporting a Dutch scheme worth €406.4mn ($411mn) to fill the Bergermeer gas storage facility, given the EU economy is suffering serious disturbance in its energy market.

The Netherlands had its storage facilities filled to 56.9% capacity on January 11, meaning it still has a long way to go to fulfil the EU-mandated goal of having storage facilities at 80% of capacity by November 1. It has been hit hard by Russia halting gas supply in May, over the country's refusal to comply with a decree that would require it to pay for gas in rubles.

The Dutch government has proposed a scheme that would ensure that its gas facilities remain at least 80% full by November 1. Whereas the country's other facilities store low-calorific gas, historically produced from the giant Groningen field off its coast, the Bergermeer site stores high-calorific supplies. While the Netherlands already has in place agreements to fill the low-calorific facilities, it still needs to shore up supplies at Bergermeer.

Market participants have an incentive to store gas in summer when prices are lower than they are projected to be in the next winter. But summer prices are nearly at a record high now, with the front-month TTF contract touching $1,970/'000 m3 on the morning of July 13, as a result of cuts in Russian and Norwegian supply. Contracts for winter gas supply are only slightly higher.

Under the scheme, the government will provide insurance against a negative winter-summer gas price spread, covering the cost of storing gas in summer when the spread is too low to cover those costs. The maximum amount of aid that will be granted is €406.4mn ($410mn). 

The aid will be awarded through a competitive tender involving two separate auctions that were carried out on May 30 and June 7. There will also be a provision to avoid distortions of competition, including a profit sharing mechanism with the Dutch government in case participants make excessive profits unexpectedly.

The commission said the scheme was "appropriate, necessary and proportionate," and would shore up the Netherlands' security of gas supply without affecting trading conditions too much. It will only apply to gas placed in storage before October 21.