Brussels entices banks to provide guarantees for gas stored in Ukraine

Brussels is in talks with banks to provide guarantees for companies wanting to store their gas in Ukraine’s vast underground gas storage despite the prospect of it being destroyed.

The war-torn country has the largest gas tanks in Europe and has offered its capacity to European companies facing a potential supply glut in winter as storage levels within the bloc are already at a record high.

But businesses have qualms about storing gas reserves in Ukraine, even as 80 percent of underground facilities are located in the country’s west, furthest from the frontline. Russia has targeted Ukrainian gas pipelines in previous attacks, but so far no underground storage has been hit.

Currently only a few companies with a high tolerance for risk are using Ukraine’s storage. European Commission Vice President Maros Čefčovič told the Financial Times that “on top of the competitive prices Ukrainians are offering, we need to work on guarantees for international actors”.

He added that the Commission is “in talks with lenders such as the European Bank of Reconstruction and Development to develop this idea into a working project, which will further boost Europe’s energy security”.

Four EU officials also confirmed the talks. A commission official said Brussels was talking to governments as well as financial institutions about providing “adequate insurance coverage”, adding that it would help “reduce the risk premium related to the situation in Ukraine”. Will do

The EBRD confirmed it was in contact with the commission but declined to comment on the discussions. The European Investment Bank said it had been consulted but that it would be against its policy of financing fossil fuels.

Ukraine’s storages, which are owned by the state gas company Naftogaz, have a capacity of 31 billion cubic meters of gas. According to Naftogaz, if Ukraine can regain territory occupied by Russia, it is likely to offer up to 10 bcm to 15 bcm to European companies. This would increase the EU’s underground gas storage capacity to around 115 BCM.

“Ukraine holds the largest underground gas storage in Europe and a vast transmission infrastructure, capable of supplying to more than 15 countries”, Naftogaz told the FT. The storage capacity that Ukraine can provide is “extremely important for European countries that lack their own storage facilities and want to accumulate reserves for the winter”, it added.

Ukrtransgaz, a Naftogaz subsidiary that operates the storage sites, was certified in April as a gas storage operator that meets EU standards – Ukrainians being used for the block’s strategic gas reserves A condition of gas storage.

Storing European gas in Ukraine’s tanks would be a way to provide Kiev with the revenue to support it against a full-scale invasion of Russia. Before the invasion, 28 countries held gas in Ukrainian storage, but apart from Moldova, officials would not disclose which countries currently have gas stored in tanks for security reasons.

EU gas storage tanks are 68 percent full, an unusually high level for June, due to a slump in demand in a mild winter. Researchers at Columbia University’s Center on Global Energy Policy warned this week that Europe faced a potential oversupply and that Ukraine’s “underused and readily available” storage “could provide Europe with its current — but temporary — gas surplus over the winter.” And there was a unique opportunity to take that further.” ,

But European companies have lost appetite as a result of infrastructure risks amid Russian missile attacks on Ukrainian cities and Kiev partially banning gas exports following the full-scale invasion of Moscow last year.

Natasha Fielding, head of European gas pricing at the Argus, said: “If the EU can draw up a scheme that will protect companies against potential losses associated with storing gas in Ukraine, it would be a great opportunity to store gas in Ukraine.” can encourage a large number of firms. Media.

If Ukrainian storage “gains a wider appeal”, she said, it could provide “a large buffer to meet demand in case of extremely cold weather or any unplanned supply disruptions this winter or the following”.

Additional reporting by Christopher Miller in Kiev