European companies have been relying more on Ukrainian storage to hold natural gas and withdraw it from there once winter heating demand rose.
Firms based in Europe have been withdrawing larger volumes of gas from Ukraine in recent weeks, per data from Argus Media reported by the Financial Times on Tuesday.
Larger volumes of natural gas stored in Ukraine have helped European natural gas storage levels to keep between 85% and 90% so far this winter, analysts say.
“Ukraine is playing a key role for central and eastern Europe’s security of gas supply this winter,” Natasha Fielding, Argus Media’s head of European gas pricing, told FT.
European demand has been subdued in recent months due to slowing economic activity, but Europe still needs a lot of natural gas for space heating and power generation.
The EU reached its target to fill sites to 90% of capacity months ahead of the deadline on November 1, and hit full storage levels ahead of winter season proper.
So, energy firms have been storing growing volumes of natural gas in Ukraine’s storage facilities as the EU’s sites were nearing capacity.
Despite risks of potential hits due to the war, traders have started to store natural gas at storage sites in Ukraine, taking advantage of the lower costs and high available storage capacity. The commodity can be bought anywhere and sent to Ukraine via reverse flows in pipelines from Hungary, Slovakia, and Poland.
With the EU storage nearly full, Ukraine’s available capacity could help the bloc ease gas supply concerns ahead of the winter, Brussels-based think tank Bruegel said in an analysis in July.
In October, Ukraine’s Prime Minister Denys Shmyhal said that the country was ready to allow non-resident traders to use up to half of its natural gas storage capacity.
Ukraine has 30 billion cubic meters (bcm) of underground storage capacity. As much as 12 to 15 bcm of this capacity could be allowed to be used by foreign traders to store gas, according to the prime minister.
Source: Oilprice.com