The EU Commission has published (click here) a proposal to extend the EU Gas Storage Regulation by two years.
What is it about?
- The Gas Storage Regulation was adopted in June 2022 in response to a prolonged period of volatile and high energy prices starting in 2021 and exacerbated by Russia’s invasion of Ukraine in 2022. The EU amended Regulation (EU) 2017/1938 on Security of Gas Supply (click here) which set, amongst other things, mandatory annual filling targets by 1 November each year as well as meeting filling trajectories intra-year to meet the designated target. EU Member States without gas storage were also required to store at least 15% of their annual gas consumption in another Member State. Many of the provisions of the regulation are currently due to expire on 31 December 2025;
- This week the EU Commission recommended that the legislation be extended by a period of two years until the end of 2027. They contend that the two-year extension will contribute to ensuring continued security of supply across the EU, and stability for EU gas prices in the context of an unsettled geopolitical landscape and tight global gas markets. The extension will also help to ensure coordination and preparedness across EU Member States for the upcoming winter season;
- With an eye on preventing distortions to the gas market, particularly in regions where there is little or no security of supply risk, the EU Commission is recommending additional flexibility options ahead of the next filling deadline including an extension of the 1 November deadline by one month (i.e. to 1 December) in cases where technical issues have inhibited filling efforts. It also allows for lower filling obligations for those Member States which have significant underground storage capacity, as well as permitting Member States with substantial LNG storage infrastructure to count such storage toward the final target. The EU Commission’s proposals must pass through the regular legislative process (i.e. the so-called “Trilogues”), followed by votes by the EU Parliament and Council to adopt the extension once mutual agreement is reached. The EU Commission’s announcement was accompanied by this Q&A.
As part of this week’s announcement, the EU Commission also published this 13-page report on the impacts of the Gas Storage Regulation over 2024. The report is mandated under Article 17a of the regulation and is directed at the EU Parliament and the Council. The report addresses, amongst other things, ongoing compliance with the filling trajectories and targets, as well as an analysis of the potential effects of the regulation on natural gas prices and gas savings.
According to the report, the only country to miss the 1 November target filling date in 2024 was Denmark that managed to achieve a fill rate of 75%. The failure to reach the 90% target was attributed to a combination of technical infrastructure issues relating to the commissioning of the Tyra production platform (Denmark’s largest gas field where production was restarted in 2024), and unplanned maintenance on the Nybro gas terminal. Indirect impacts also arose from Germany’s tax on gas transportation which led to relatively more gas being withdrawn from non-German sources, including from Denmark.
Section eight of the report (see page 11) provides commentary on the potential effects of the regulation on gas prices in 2024. They note that while prices generally stabilised over the period, in late 2024 / early 2025, a tighter market and colder weather triggered a trend of negative summer-winter spreads which are not favourable for storage injections during the summer filling period. While the report notes that expected additional LNG capacity soon to come online will have a positive impact on prices, the EU Commission will support Member States to better coordinate and provide more flexibility on filling trajectories, allowing them the ability to meet their filling targets at their own pace.
In conclusion, the report notes that the overall EU storage levels in early 2025 decreased to a level equivalent to the pre-crisis average in just four weeks. This was undoubtedly one of the main empirical observations that spurred the proposal for a two-year extension of the regulation.
