NEW CRISIS CHANGE EU GAS RULES - Filenews 30/3
The new geopolitical crisis in the Middle East is bringing the weaknesses of the European energy model back to the fore and pushing Brussels to reconsider key gas policy options. A few years after the shock caused by the war in Ukraine, Europe is facing new pressure on supply, which highlights that dependence on LNG imports and excessive reliance on storage are not enough to ensure energy security.
Developments in the Middle East, combined with the impact on liquefied natural gas flows and disruptions to navigation in the Strait of Hormuz, have effectively reduced a significant part of the global supply. This situation, together with attacks on energy infrastructure and a climate of generalized uncertainty, has led to higher prices and growing concern about supply adequacy ahead of next winter.
In this environment, European gas storage facilities are back at the center of the strategy. Europe has a total storage capacity of more than 100 billion cubic meters, covering about 25% to 30% of winter consumption. However, stocks remain low for the season, increasing the pressure for rapid replenishment.
The issue, however, is not only technical but also deeply economic. The current market conditions, with summer prices moving higher than winter prices, create a strong disincentive to storage. Companies are being asked to buy more expensive today and sell cheaper tomorrow, a condition that distorts the functioning of the market and makes it difficult to meet filling targets.
Pressure to change rules
In these circumstances, the European Commission is considering adjustments to the regulatory framework. On the table is the reduction of the mandatory warehouse filling target from 90% to 80%, but also the adoption of a more flexible, gradual approach, in order to prevent sudden price increases during the summer season.
This debate reflects a deeper shift in philosophy: from strict regulation to a more flexible system, in which the market will operate with fewer interventions. Market players are already pointing out that mandatory filling targets may produce the opposite effect, boosting summer demand and fuelling a further rise in prices.
The misconception surrounding storage
At the core of the discussion is a crucial fact: natural gas storage facilities are not a new source of energy, but a tool for energy flexibility. They do not increase supply, but transfer quantities from one period of time to another.
This means that in conditions of a real supply shortfall, storage cannot be a substitute for imports. On the contrary, filling warehouses becomes even more difficult when prices go up and availability is limited.
For this reason, the view is reinforced that more targeted policy tools, such as compensation mechanisms for companies that store gas in periods of negative margins, are needed, rather than horizontal obligations that disrupt the functioning of the market.
LNG and new geopolitical risks
At the same time, the crisis highlights Europe's strategic dependence on liquefied natural gas, which has largely replaced Russian pipeline flows. Before the invasion of Ukraine, Russia covered up to 45% of the EU's gas imports. Today, the burden has shifted to suppliers such as the US and Qatar.
However, this new dependency creates different types of risks. An interruption in the production or transport of LNG, as demonstrated by the effects of the crisis in the Middle East, may cause immediate turbulence in the European market. At the same time, the safety of maritime transport routes is now emerging as a decisive factor for the stability of the energy system.
From security to flexibility
The main conclusion is that Europe's energy security can no longer rely on a single tool, such as storage. Instead, a multidimensional model is needed that combines diversified sources of supply, strong interconnections between countries, investments in LNG infrastructure and more tailored market mechanisms.
In this new environment, countries with developed networks and access to multiple sources of supply gain a clear strategic advantage, acting as transit and balancing hubs of the European energy system.
Capital.gr
