Russia’s Gazprom Says Gas to Flow Into EU Storage This Month

(Bloomberg) --

Russia’s Gazprom PJSC said it’s kicking off a plan to send gas into five European storage facilities in November, delivering on a promise made by President Vladimir Putin to the energy-hungry continent last month.

“The volumes and gas-transportation routes have been determined,” Gazprom said in a statement, without giving further details. Two weeks ago Putin ordered the exporter to focus on refilling its inventories in Germany and Austria from Nov. 8, following completion of a Russian stockpiling campaign.

European gas prices have surged about fourfold this year, with Russia keeping supplies capped and liquefied natural gas cargoes diverted to Asia. As a result, inventories began the heating season at their lowest seasonal level in more than a decade.

Gazprom’s comments helped push regional benchmark gas lower. But for a sustained decline in prices, the market wants more details on the Russian company’s plans to fill its European storages, which Tuesday’s statement lacks, said Tom Marzec-Manser, head of gas analytics at ICIS.

Gazprom has booked an extra 10 million cubic meters a day of pipeline capacity at the Ukraine-Slovakia border, according to the Ukrainian Transmission System Operator, which would take its flows to some 100-102 million cubic meters on Tuesday.  

Supplies through another major route -- the Yamal-Europe pipeline into Mallnow in Germany -- are also flowing westward from Poland, resuming their normal course after the direction was reversed in late October and early November. 

Gazprom sent some fuel into its German storage facilities over the weekend and some injections are continuing, albeit at lower levels, according to data from its Astora unit.

More Needed

The market still needs more convincing. Flows via Ukraine have to be at a minimum 110 million cubic meters a day, and that to Mallnow at 30 million a day for traders to be assured Gazprom is fully utilizing its transit capacities, Marzec-Manser said. Any additional flows, which would only be possible this month if Gazprom books extra capacity at daily auctions, would only help to ease prices further, he said.

The company should send more supplies to make “a material difference before winter hits in full,” according to Ron Smith, a senior oil and gas analyst at BCS Global Markets. Gazprom would probably need to re-inject 3 billion to 5 billion cubic meters into its European storage, or over 100 million cubic meters a day, over the next 30 days, he said.

“This is a significant amount but achievable, given that Gazprom export to Europe can exceed 600 million cubic meters per day in peak winter periods,” Smith said. “If Gazprom is indeed making a serious effort to fill its own European storage, we should see a significant ramp-up in exports in the next few days.”

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