Europe faces a significant challenge in replenishing its gas reserves ahead of the winter months. Analysts estimate that the continent may require up to an additional 250 cargoes of liquefied natural gas (LNG), translating to a minimum cost of $11 billion. This demand is partly driven by Ukraine, which alone will need at least 30 extra cargoes. As of now, gas storage levels within the European Union stand at just under 34%, the lowest they’ve been since 2022.
The winter season of 2024-25 is anticipated to demand more gas due to colder conditions and decreased wind, resulting in increased withdrawals from these stores. To mitigate potential supply shortages exacerbated by the aftermath of Russia’s invasion of Ukraine, the European Commission has set an ambitious target of ensuring that gas storage sites reach 90% capacity by November 1. However, with the need to increase purchases amidst dwindling pipeline supplies, Europe will have to turn to globally traded LNG, often at a premium, competing with Asian buyers. Jason Feer from Poten and Partners advises that aggressive purchasing will be necessary during the spring and summer months to achieve the required inventory levels.
Analytical forecasts indicate that achieving the 90% target will require approximately 57.7 billion cubic meters of net injections—25.8 billion cubic meters more than the previous year. This translates to a projected cost of around 10.3 billion euros for Europe based on current gas prices. Yet, there are doubts about the feasibility of meeting this target, and the European Commission is contemplating relaxing storage requirements to provide more flexibility for importers. In addition, the situation in Ukraine further complicates matters, as the country’s gas stores are nearly depleted due to ongoing military actions.
Ukraine may need to import as much as 5 billion cubic meters of gas, primarily in LNG form, which contributes to the overall competition for supplies in the region. Rising prices and a lack of incentive for traders to fill storage during summer months pose additional hurdles. If the market does not shift to favor gas storage, some governments may need to consider subsidies to ensure adequate reserves are built before winter.