Latvia falls short of EU 80pc storage ambition

Latvia did not reach the EU's 80pc fill target for gas storages by 1 November, but surpassed its special target of 35pc of annual consumption over the past five years.

Stocks at Incukalns were 13.8TWh on Tuesday morning, out of a total capacity of just over 24TWh, according to the latest data from the GIE transparency platform. That said, Latvia was one of four EU countries exempted from the obligation to fill its storage to 80pc, along with Austria, Hungary and Slovakia, owing to the fact that their storage facilities are very large relative to their annual consumption. These countries were only obligated to fill their storages to 35pc of their average annual gas consumption over the past five years.

Latvia consumed an average of 12.74 TWh/yr in 2017-21, transmission system operator (TSO) Conexus Baltic Grid told Argus. A 35pc share of this average consumption would be just 4.46TWh, meaning this stock target has already been exceeded. In fact, just gas stored by state-owned utility Latvenergo will almost meet this threshold, as it has already stored 2TWh to ensure security of supply for its combined heat and power plants, and will store another 2TWh as a strategic reserve in the fourth quarter of this year, to be delivered at Lithuania's 2.9mn t/yr Klaipeda LNG terminal.

And Latvian consumption has declined significantly so far this year compared with 2021, to a total of 6.07TWh in January-31 October from 9.46TWh in the corresponding period of the previous year, a fall of around 36pc, according to data from Conexus. This means that Latvia should have more than enough gas in storage for the winter period, despite Latvia's largest gas supplier Latvijas Gaze being put under investigation for its failure to store sufficient gas supplies required under the country's newly amended energy laws.

However, it is hard to tell exactly how much of the gas stored in Incukalns can be used for Latvian consumers, as buyers from all over the region store gas in the facility to withdraw during the winter season. EU countries without their own storage facilities must store 15pc of their annual domestic consumption in other member states, meaning that the other Baltic countries and Finland will also have gas there. It is less clear whether or not these countries have met their storage target for 1 November.

But gas demand across the region is down significantly year on year, which should alleviate supply tightness. For instance, Lithuanian gas consumption fell by 36pc in January-September compared with a year earlier, mostly driven by a significant reduction in consumption by the country's biggest consumer, Lithuanian TSO Amber Grid said.

Exempted countries outperform target

Despite also being exempted from the 80pc storage target, Hungary, Austria and Slovakia all surpassed this level by 1 November.

As of Tuesday morning, Hungarian facilities were 85.2pc full, Austrian facilities 92.5pc, and Slovak ones 92.8pc full, according to data from the GIE transparency platform. Austrian injections in particular have benefited from low domestic demand and increased Russian flows over the past month. Receipts from Russia's state-controlled Gazprom have declined following capacity limits on the 55bn m³/yr Nord Stream pipeline, with supply cuts in a range of 50-70pc since mid-June. But Russian gas flows to Austria at Baumgarten have "gone up to about 65pc" in recent weeks, Austrian firm OMV chief executive Alfred Stern said.

And Hungarian stocks have been buoyed by increased Russian flows too, with Hungary recently concluding short-term agreements with Gazprom for additional Turkish Stream pipeline volumes to fill storage. The latest agreement was for up to 5.8mn m³/d of gas on top of contractually agreed quantities in September-October. The Hungarian Hydrocarbon Stockpiling Association started to create a "special gas reserve" ahead of the 1 November deadline and deliveries are ongoing, the association told Argus in September.

Slovakia expects to have excess gas to export to Poland this winter, given high inventories and the continued arrival of LNG and pipeline gas from Norway, Slovak state-owned supplier SPP chief executive Richard Prokypcak said. But this plan could be difficult following further delays to the commissioning of the Poland-Slovakia interconnector, with the link's start-up date still unclear.

By Brendan A'Hearn