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Gazprom Plays Games With Europe

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Despite orders from the top, Gazprom appears to be doing very little to boost depleted European gas storage. While it began injections into European facilities three weeks ago, data from storage operators suggests these are being outpaced by withdrawals in Germany and Austria. That looks set to keep European gas prices high into 2022 and ensure profits remain buoyant — although the Russian state giant admits that the soaring prices are also eroding demand.

The company will keep injecting gas into European storage until the end of December, Gazprom Export official Andrei Zotov told an investor call on Nov. 29. But he admitted that inventories will be lower than a year ago.

Russian President Vladimir Putin ordered the company in late October to replenish storage in Germany and Austria to help bring down European gas prices and meet winter supply commitments. But Gazprom appears to be in no hurry. Since Nov. 9, when it said it would start refilling European storage after completing domestic injections, it has in fact withdrawn a net 67 million cubic meters from facilities in Germany and Austria. Volumes of working gas fell by 63 MMcm at Haidach in Austria from Nov. 9-29, and by smaller amounts at Rehden and Jemgum in Germany — although they did increase by around 20 MMcm each at two other German sites, Katharina and Etzel.

Jemgum is now 86.9% full, compared with 94.3% full a year ago, and Haidach 50% full, down from 87%. Rehden is just 9.1% full, down from 79.5% last year, according to data from Gas Infrastructure Europe. All three sites are controlled by Gazprom subsidiary Astora. Etzel, operated by a Gazprom joint venture with BP and Orsted, is now 96.7% full, similar to last year's 97.6%, but Katharina, operated 50-50 by Gazprom and Germany’s Verbundnetz Gas (VNG), is only 47% full, down from 93% a year ago.

Last year, Gazprom injected 2.4 billion cubic meters into European storage ahead of winter, leaving stocks at almost 11 Bcm. It withdrew 10.6 Bcm over winter, partly because it preferred to sell out of storage rather than pipe more gas via Ukraine. It did not actively replenish stocks in the summer as it restricted flows via Ukraine and through the Yamal-Europe pipeline across Poland. Many saw the restrictions as a tactic to keep European prices high and force speedier approval of its controversial Nord Stream 2 gas pipeline.

Gazprom denies market manipulation. It attributes the late and slow injections to the need to make Russian storage refills and supply the priority, which put pressure on production capacity. Zotov said Gazprom had to inject 72.6 Bcm into domestic storage after its own stocks were drained last winter, while domestic consumption has increased significantly this year. Since October, it has been producing close to its maximum capacity of 1.5 billion cubic meters per day, management said on the investor call.

Domestic storage is now full, but Gazprom does not have enough transport capacity to inject gas into European storage while also meeting short-term demand. It booked limited transit shipments through Ukraine and Poland in November, and nothing via Poland for December. But with its hopes vanishing of seeing Nord Stream 2 start up anytime soon, some Russian analysts suggest Gazprom may have to book more capacity in weekly and daily auctions.

The company reckons EU storage totaled 75.25 Bcm on Nov. 27, down from a six-year average of 90.73 Bcm. Zotov said European buyers haven’t actively injected gas into storage either, because soaring prices leave them unable to make a profit on the purchase, storage and withdrawal of gas this winter.

The company said the high prices are eroding demand. Its own exports to Europe fell 6% year on year in the third quarter, which it said was in line with the general decline in regional gas consumption, mainly in power generation. But they helped it post record revenues and profits in the first nine months of 2021, with the promise of even better results in the fourth quarter and into next year. The nine-month profit exceeded previous full-year results, and will allow it to boost capital spending in 2022.

Gazprom's Gas Storage Capacity in Europe
CountryStorageGazprom's Equity Stake (%)Total Active Capacity (Bcm)Gazprom's Capacity (Bcm)Daily Withdrawal Capacity Used by Gazprom Group (MMcm/d)Daily Withdrawal Capacity Used by Gazprom Export (MMcm/d)
AustriaHaidach55.5%3.12.424.524.5
SerbiaBanatski Dvor51.00.550.282.52.5
GermanyJemgum83.30.90.819.90.0
GermanyKatharina50.00.520.5225.825.8
GermanyRehden100.04.244.2450.550.4
GermanyEtzel33.01.00.36.90.0
Netherlands Bergermeer0.0*4.61.8526.126.1
Czech RepublicDamborice 50.0%0.370.36.96.9
Total15.2810.69163.1136.2
Gazprom's European Storage Injections/Withdrawals Nov. 9-29
(MMcm)Injected WithdrawnNet Injection/ WithdrawalWorking Gas Vol. Nov. 8Working Gas Vol. Nov. 29
Haidach10.273.3-63.1602.2539.0
Rehden20.951.1-30.3403.8373.4
Jemgum26.138.4-12.3698.0685.6
Katharina28.211.117.1211.4228.5
Etzel31.09.421.6975.8997.4
Total116.4183.5-67.02,891.22,824.0

Topics:
Gas Supply, Gas Prices, Gas Inventories
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