Including an analysis of the current global gas crisis – New report by CEDIGAZ
Underground gas storage is back in the spotlight with the current gas crisis, which once again illustrates its importance for security of supply, especially in Europe. The new 2021 Underground Gas Storage Report published by CEDIGAZ therefore includes an in-depth analysis of the underlying causes of the current crisis and highlights the crucial importance of storage to ensure the flexibility of the gas system. The report also provides an update of key global UGS statistics and regional dynamics at work with a focus on China and Russia.
Current gas crisis: Blame the weather and the market
European spot natural gas prices and Asian spot LNG prices reached all-time highs in October. The steep rise reflects a severe mismatch between gas supply and demand and was caused by a combination of several factors: a strong recovery in gas demand, notably in China, where coal shortages and environmental pressure reinforced the call on gas demand; unplanned LNG supply outages; extreme weather events that put immense pressure on the gas supply system, as well as on hydropower and wind generation; a sluggish recovery in gas production; and lower natural gas storage inventories in Europe.
The newly issued 2020 report on UGS by CEDIGAZ highlights the key data from the 2020 update of its global UGS database and provides a detailed analysis of 4 markets of utmost importance in balancing global gas markets now and tomorrow: Europe, Ukraine, Russia and China.
2020 UGS HIGHLIGHTS:
Europe: unprecedented high stock volumes in storage
Uncertainty about the outcome of the Russia-Ukraine negotiations after the expiry of the transit contract between Gazprom and Naftogaz at the end of 2019, strong LNG capacity additions and the Covid-19 triggered demand crunch have resulted in record filling levels of European UGSs and have led European shippers to turn to Ukraine to store their excess gas.
Highlights from the latest update of Cedigaz’ Worldwide UGS Database.
Only 25 bcm of working capacity is under construction
The capacity currently under construction is limited. At worldwide level, there are 48 storage projects under construction adding 25 bcm of working capacity. This includes only 15 new storage sites (12 bcm) and 33 expansions (13 bcm). Again, this is lower than last year’s report (58 projects adding 36 bcm of working capacity) and previous ones. This is partly due to the commissioning of storage facilities in 2016, but also to cancellations of projects. Most of the projects under construction will be completed by 2020/25. All regions, but Central and South America, participate in the additions to storage capacity currently under construction. It is worth noting that Europe ranks first, but capacity under construction is concentrated in Italy, where the storage regulation is much more favorable than in other European countries. The CIS ranks second with expansions and new facilities built in Russia. The Middle East and Asia-Oceania account for 23% and 18% of the world additions. The shift of storage investment to new emerging and growing gas consuming countries started at the beginning of the 2010s and is expected to dominate the next 20 years. The additions to withdrawal capacity are dominated by Europe reflecting the focus towards highly flexible storage in the region.