Gazprom PJSC needs to store nearly as much natural gas at home to keep Russians warm this winter as it currently ships to its top customer Western Europe every day, Bloomberg calculations show.
The Russian gas giant has just two months to build its depleted inventories to the record levels it’s targeting, a goal the Energy Minister Nikolay Shulginov expects Gazprom to meet. That will require pumping into underground storages sites in Russia supplies equal to about 80% of daily exports to Western Europe.
The calculations, based on Gazprom’s data, send a worrying signal to Europe. The continent is running out of time to boost its own buffer stockpiles ahead of the heating season, with countries from the U.K. to Spain and Germany already contending with energy inflation due to soaring gas and electricity prices.
Sources: Gazprom data (Russian accounting standards), Bloomberg calculations
*Russia’s domestic supply in 1Q normally more than twice as high as in 2Q
“To reach that goal, Gazprom has to prioritize discretionary supply away from Europe,” said Tomas Marzec-Manser, lead European gas analyst at ICIS.“While challenging, I’m sure it will be met.”
European gas prices are breaking records day after day even though it’s summer, when demand is usually low. The region’s inventories are at their lowest in more than a decade for this time of year after a bitter winter left storage sites depleted. Boosting reserves hasn’t been easy, with Russia limiting pipeline supply and cargoes of liquefied fuel being diverted to Asia.
“To reach that goal, Gazprom has to prioritize discretionary supply away from Europe,” said Tomas Marzec-Manser, lead European gas analyst at ICIS.“While challenging, I’m sure it will be met.”
European gas prices are breaking records day after day even though it’s summer, when demand is usually low. The region’s inventories are at their lowest in more than a decade for this time of year after a bitter winter left storage sites depleted. Boosting reserves hasn’t been easy, with Russia limiting pipeline supply and cargoes of liquefied fuel being diverted to Asia.
Russia is Europe’s biggest supplier, but in itself a big consumer of gas. The country aims to have a record 72.6 billion cubic meters in domestic inventories by Nov. 1, almost doubled the levels at the end of June, according to Bloomberg calculations using data from Gazprom, which only releases inventory levels sporadically.
Achieving that target will require Russia to store about 280 million cubic meters a day, or roughly 80% of daily exports to Western Europe. Daily gas injections into storage in Russia this year are probably higher than historical averages by some 80 million cubic meters a day, Marzec-Manser said.
Gazprom’s output is near 10-year highs, but domestic needs also surged thanks to abnormally cold temperatures in some regions during the past winter and heat waves this summer. Exports to consumers including China and Turkey also increased 19% in the first eight months of the year.
“It makes logical sense for Gazprom to fill up domestic storage and then once complete flow more gas into Europe given the premium,” said Nick Campbell, a director at Inspired Energy.
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience in implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor in this space. Stuart has led the “Total Corporate Digital Integration” platform at Sandstone and works with Sandstone clients to help integrate all aspects of modern digital business. He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage and is the Co-Host of the energy news video and Podcast Energy News Beat.
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