The European Commission is aiming for EU countries to start buying gas jointly "well before summer", in a bid to help countries refill their storage and avoid a supply crunch next winter, European Commission Vice-President Maros Sefcovic has told Reuters.
The EC hopes that the scheme will help Europe refill depleted storage caverns and also negotiate lower prices by using countries' collective buying power.
Although Europe has managed to fill its gas stores ahead of winter, it has paid a heavy price: the cost of replenishing natural gas stocks is estimated at over 50 billion euros ($51 billion), 10 times more than the historical average for filling up tanks. Luckily, gas prices have plunged since which coupled with high temperatures in Europe might lower gas demand and keep prices manageable.
The EC will require EU countries to ensure their local companies take part in the aggregation of gas demand with volumes equivalent to 15% of the gas needed to fill that country's storage facilities to 90% of capacity. This requirement amounts to ~13.5 billion cubic meters of gas-- a relatively miniscule amount considering the bloc used up 338 bcm in 2021. Sefcovic has urged member states to swiftly engage with market players in their countries to estimate purchase volumes after meeting EU country representatives to coordinate the planned purchases.
The EC will be hoping to avoid the scenario that happened with the LNG sector. European Union energy regulators failed to launch a planned LNG price assessment by a Friday deadline because they were unable to receive enough data from the market participants, Reuters reports.
The price assessment by the Cooperation of Energy Regulators (ACER)--which Europe is switching to as it ditches Russian pipeline gas--is part of the EU's plan to launch a new European benchmark piece for LNG. The new benchmark will become the basis for LNG contracts after the traditionally-used Dutch Title Transfer Facility (TTF) gas hub price became too volatile last year after Russia cut pipeline gas deliveries to Europe.
By Alex Kimani for Oilprice.com
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