Germany reports that natural gas storage tanks are 95 percent full, two weeks before the self-imposed deadline. We are well prepared for winter 2022/2023, but it could be difficult to repeat the feat next year.

The good news first: Despite the total failure of the Nord Stream and Yamal pipelines and thus no more gas deliveries from Russia, the gas storage facilities in Germany and the EU are well filled. In this country, the Federal Ministry of Economics reported an average filling level of 95 percent this week. It was actually only planned for November 1st. In the past five years, the filling level at this point was only 87.9 percent on average.

In the entire EU, the current filling rate is 91 percent. Countries such as France, Austria and the Netherlands have also filled their stocks to a greater extent than in previous years. Italy lags behind by about 2.1 percentage points, but that’s not dramatically low either. Filling the storage tanks was expensive. The gas price at the Dutch trading point TTF is still 57 percent higher than a year ago and 963 percent higher than two years ago. Most recently, the gas price has fallen by around 56 percent since the end of August – also because the storage levels are increasing.

Germany and the EU have thus achieved a feat of strength that should in all likelihood get us through the winter safely without private households having to freeze – even though heating will remain an expensive pastime. But for 2023, experts are already warning of several factors that could make it difficult to fill the gas storage tanks again in good time. These would be:

Nord Stream 1 has been out of service since the attacks in late September. Whether this will ever change again is uncertain. So far it is unclear how extensive the damage to the tubes is and whether and when it can be repaired at all. Even if this is technically possible, there must also be political will.

With Nord Stream 1, around 18 percent of the gas deliveries to Germany from peacetime are canceled. Nord Stream 2 was also damaged in the attacks, but it has no operating license anyway. Russia stopped deliveries via the land-based Yamal pipeline in May.

For both technical and political reasons, Russia is unlikely to resume supplies in the coming year. The Ukraine war on which the dispute over gas is based does not appear to be ending any time soon. This would mean that Germany would have to fill its gas storage facilities from other sources in 2023. That was also the case this year, but only from the summer. This time the Russian deliveries are canceled all year round.

One reason Europe is getting off lightly this year is liquefied natural gas (“LNG”) shipments from other continents, most notably the US. That was consistently cheaper than the continental natural gas price. Most recently, the cost of one million British Thermal Units (MMBtu) fell to around $34. Converted to the megawatt hour and in euros, that is around 121 euros – so significantly less than the 147 euros that are currently being called at the TTF trading point.

The reason for this discrepancy, which is favorable for us, is the lower LNG orders from China. Among other things, the huge empire bought less natural gas because factories and businesses were either shut down or temporarily closed completely due to Covid lockdowns and this year’s economic weakness.

However, the trend can change quickly, as the major bank Morgan Stanley recently noted in a note for their customers and the analysts from Sinopec and BSC Energy Consulting in a joint evaluation. According to this, China will probably consume more LNG in December than it has currently ordered, because the winter there is expected to be colder than previously planned. If this continues in January, LNG prices would rise again.

Europe has a huge gas field in the Netherlands, but that will be even less used in 2023 than this year. The closure of the Groningen gas field was decided long before the energy crisis. The next reduction in production volumes took place in October. The Netherlands will only pump 2.8 billion cubic meters to the surface by next autumn. For comparison: in 2019 it was 16 billion cubic meters. The fact that gas is still being pumped at all is only for the purpose of keeping the systems in good shape. The Netherlands only wants to ramp up production again in an extraordinary crisis situation.

Without the gas from Groningen, the European gas market will lack another source in 2023. Although the Netherlands hadn’t pumped much out of the field this year either, it won’t get any better with less funding.

The German gas storage facilities will initially settle down over the winter. The International Energy Agency IEA and the Federal Network Agency expect filling levels between 20 and 40 percent in the spring. From there they need to be replenished to 90 percent again in November. That was already a hard-earned achievement this year – not just literally because the prices were high.

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There is hope that Germany will be able to put its first LNG terminals into operation in the North Sea in 2023. This makes deliveries from the USA, Norway and the United Arab Emirates possible. At best, the additional deliveries should further depress the gas price in this country. However, it is unlikely that the low price levels from before the energy crisis will be reached again.

This means that natural gas will only be sufficient in 2023 if Germany also consumes less natural gas. The crisis has led to many companies in the industry trying to adapt their production accordingly. Private households are also consuming less natural gas this year than in previous years. In addition to the high prices, this is also due to the comparatively warm weather so far.

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