Impact of Ukraine crisis on security of supply tops the Madrid Forum agenda
Madrid, 6 May 2014
• Storage can and should play a key role in security of supply • LNG regasification has potential but is under used due to high LNG prices
Storage can and should play a key role in security of supply The impact of the Ukraine crisis on security of supply and market development in the EU tops the agenda of today’s European Gas Regulatory Forum1 (“Madrid Forum”).
Inviting the Council of European Energy Regulators2 (CEER) and Gas Storage Europe (GSE) to present their storage assessment, the European Commission underlined that the situation in the Ukraine has brought Europe’s security of supply sharply into focus.
CEER and GSE informed participants that the current storage stocks remain high in Europe relative to last year; that storage has played a key role in providing short term security of supply during this crisis; but that going forward the outlook is unclear as there might be storage facility closures.
Walter Boltz, CEER Vice President explains “The healthy storage stocks across Europe have helped dampen near-term security of supply concerns relating to the Ukraine crisis. But, the seasonal price spread was at historical lows until very recently, which discourages users from contracting storage and could ultimately even lead to storage facility closures. Storage has proven to be one of the very few short term measures available to lessen the impacts of supply disruptions. To realise the full value of storage, a level playing field with non-discriminatory rules and a regulatory framework conducive to innovation by storage operator is needed. ”
LNG regasification capacity is available but under used due to high LNG prices In the context of Russian gas imports (130-140 bcm in 2013) to Europe, CEER further illustrated the role of LNG in Europe’s security of supply. The EU has 19 regasification terminals and about 73% of its technical regasification capacity (i.e. 137 bcm of regasification capacity) was not used in 2013. In case of a gas supply disruption, increased LNG deliveries (in BE, ES, FR, GR, IT, NL and UK) could help cover Europe’s needs and free up pipe-gas for the other parts of the EU. CEER highlighted, however, that the potential flow of LNG eastwards could be limited due to constraints on the EU gas transmission network. Also LNG prices on the global market are significantly higher than current pipeline gas prices. Thus a larger share of LNG, purchased to increase security of supply would drive up LNG prices at European hubs.
Walter Boltz concluded “The loss of Eastern gas supplies cannot be compensated only with LNG imports. Instead a combined response of storage use, increased imports from all alternative sources is most efficient. We also need to look at other fuels to replace gas in the short run in case of supply disruptions."
CEER’s work on storage was already welcomed at the last (October 2013) Madrid Forum, when regulators assessed the storage situation in Europe in order to better understand the factors influencing the use of storage and their effects on security of supply. The strategic discussion will continue with a workshop (end of May) where it is planned to develop a joint CEER-GSE vision on storage.
Ends
Notes for Editors:
1. The European Gas Regulatory Forum (Madrid Forum) a bi-annual meeting organised by the European Commission, discusses issues regarding the creation of a true internal gas market. Chaired by the European Commission, the participants include national regulatory authorities, Member State governments, the European Commission, transmission system operators, gas suppliers and traders, consumers, network users, and gas exchanges. The 25th Madrid Forum took place from 6-7 May 2014. See CEER’s presentations on LNG and Storage at the 25th Madrid Forum.
2. The Council of European Energy Regulatory (CEER) is the voice of Europe’s national energy regulators. Its members and observers, from 33 European countries, are the independent statutory bodies responsible for energy regulation at national level. Visit www.ceer.eu.
Council of European Energy Regulators (CEER) www.ceer.eu
