European Gas Storage Obligation - Background and Purpose of Introduction
The gas storage obligation was introduced in the European Union in response to the escalation of Russian military aggression against Ukraine since February 2022, which has led to unprecedented increases in gas prices and an increased risk of supply disruptions.
What was the purpose of the gas storage obligation?
The purpose of the obligation was to strengthen the security of the gas supply by ensuring adequate reserves in case of high demand or supply disruptions, particularly during the winter period. These measures were intended to prevent an energy crisis.
Regulation (EU) 2022/10321 requires member states to fill their underground gas storage facilities to at least 90% of their capacity by November 1 of each year, with specific intermediate targets to be met during the year. These measures are intended to protect EU citizens and the EU economy from potential gas shortages caused by geopolitical instability and changing market conditions.
In 2024, after analyzing the impact of previous regulations, the European Commission proposed greater flexibility in meeting the intermediate storage fill targets.
Current Situation and Talks of Abolition:
The Commission's new proposal2 provides for more flexible filling trajectories, with intermediate targets for February, May, July, and September, adjusted to the specific conditions of each Member State. In addition, these targets take into account the average fill rates of the previous five years and the technical storage capacity in each country. The Commission emphasized that a more flexible approach could help reduce systemic stress and avoid market distortions related to gas replenishment while supporting the security of supply.
Current gas storage fill levels in Europe.
As of 17th March 2025, the fill levels are as follows:
- Underground gas storage facilities: 35%
The current fill levels are lower than in previous years. This year (represented by the yellow line) is characterized by significantly lower storage levels compared to the same period in 2023 and 2024. The storage level in 2025 is approaching the lower end of the historical range (2019–2022), suggesting increased gas consumption or reduced import levels in recent months.
Which countries and organizations are lobbying to abolish the obligation?
Some member states, including the Netherlands, Austria, France, Germany, and the Czech Republic, have initiated discussions with the European Commission about relaxing mandatory gas storage targets.
Arguments for and against the abolition (economic, political, strategic).
The discussion is multifaceted. Arguments in favor of abolition emphasize the need for flexibility, cost optimization, and adaptation to changing geopolitical conditions. On the other hand, opponents highlight the crucial role of storage facilities in ensuring energy security, maintaining market stability, and providing resilience against unforeseen crises.
Several arguments for abolishing the obligation:
- Costs and Financing:
The current regulations do not take into account the ways in which the obligation to fill storage facilities is financed, which puts intermediaries in a difficult financial situation.
Maintaining high stock levels generates costs that are ultimately borne by consumers and energy companies.
- Flexibility and Market Optimization:
Increased flexibility: Allowing a more flexible approach to achieving objectives would allow for better adaptation to dynamically changing market conditions.
Allowing gas to be purchased at more favourable prices outside the heating season can limit price fluctuations in the market.
- Current Geopolitical Situation:
Since 2022, the diversification of import sources has changed - the European Union has increased LNG supplies from the USA and Qatar, among others. Infrastructure has also been expanded, including LNG terminals and new interconnectors. EU member states have also entered into long-term contracts with Norway, Algeria, and Azerbaijan to become independent of Russian supplies.
- Market value of storage facilities:
Storage facilities allow for seasonal, short-term and geographical price arbitrage, which optimizes resource allocation and improves market liquidity. Abolishing the obligation could increase market efficiency through better use of these mechanisms.
- No incentive to build new storage facilities:
The current system of compulsory storage does not encourage investment in new storage capacities or the efficient use of existing ones. Abolishing the obligation could provide market participants with more incentives to invest based on natural price signals.
- Arguments from the Internet:
According to the author of article3 on the Reuters website, storing excessive amounts of gas can lead to inefficient use of resources and excessive operating costs. In the following article4, the authors argue that the abolition of the storage obligation could reduce the pressure on gas prices in Europe.
Arguments for maintaining the obligation:
- Energy Security:
The obligation to fill up storage facilities was introduced to increase Europe's energy security and protect against potential supply crises. Gas demand is becoming less predictable, which requires maintaining solid reserves.
- Impact on market stability:
Negative impact on gas prices: A reduction in storage levels could lead to increased volatility in gas prices during the heating season.
Germany has the largest gas storage facilities in Europe and, according to Reuters5, a reduction in liabilities could negatively impact the energy security of the entire EU.
According to the authors of the article6 on Bloomberg, a solid storage buffer is crucial for supply stability, especially during periods of high demand.
- Smoothing demand:
Storage facilities play a key role in smoothing seasonal demand, which helps avoid excessive infrastructure expansion. Lifting the obligation could lead to shortages during peak demand periods.
- Lack of sufficient market incentives:
The current pricing system does not always provide an incentive to build or fill storage facilities, especially when the price difference between summer and winter is low. Without the obligation, market participants may not store enough gas, which jeopardizes the security of supply.
Timeline and progress of talks – what decisions can be expected in the coming months?
In early March 2025, the European Commission proposed to extend the current gas storage requirements by another two years until 2027. This means that the target of filling gas storage facilities to 90% of their capacity by November 1 would remain binding, while the intermediate targets during the year would be for guidance, which would increase flexibility for market participants. The proposal is currently being negotiated between the member states and the European Parliament, which means that key decisions could be made in the next few months.
Two main factions have emerged in the discussion about the future shape of the regulation. Countries such as Germany and the Netherlands are calling for further relaxation of the rules, arguing that mandatory gas purchases at certain times could unnecessarily drive up gas prices and generate high costs for countries with large storage facilities. Other countries, including the Czech Republic, have called for changes to the targets as early as 2025, but the Commission's proposal did not take these demands into account.
In the coming weeks, negotiations are likely to focus on finding a compromise between security of supply and market flexibility. The Commission has indicated that it may take a more flexible approach to countries that do not meet the target level of storage filling in November if justified by the market situation. Meanwhile, member states that oppose rigid regulations will push for greater freedom in setting the timing of gas purchases to avoid artificial pressure on price increases.
Current gas inventory levels are significantly lower than in previous years – European storage facilities are 38% full, while in the same period of 2024, the figure was 62%. This means that decisions made in the coming months could have a direct impact on pricing and storage strategies ahead of the next heating season.
Author: Jakub Bartnicki, Consultant
Źródła:
[1] - Regulation - 2022/1032 - EN - EUR-Lex
[2] - Rozporządzenie wykonawcze - UE - 2024/2995 - EN - EUR-Lex
[3] - https://www.reuters.com/business/energy/german-gas-hub-industry-talks-about-loosening-storage-rules-uniper-says-2025-02-25/
[4] - https://www.reuters.com/business/energy/eu-work-more-flexible-gas-storage-filling-targets-draft-shows-2025-02-18/
[5] - https://www.reuters.com/business/energy/german-gas-hub-industry-talks-about-loosening-storage-rules-uniper-says-2025-02-25/
[6] - https://www.msn.com/en-us/money/other/why-europe-s-gas-storage-has-become-more-of-a-worry/ar-AA1zEeqV
[1] - Regulation - 2022/1032 - EN - EUR-Lex
[2] - Rozporządzenie wykonawcze - UE - 2024/2995 - EN - EUR-Lex
[3] - https://www.reuters.com/business/energy/german-gas-hub-industry-talks-about-loosening-storage-rules-uniper-says-2025-02-25/
[4] - https://www.reuters.com/business/energy/eu-work-more-flexible-gas-storage-filling-targets-draft-shows-2025-02-18/
[5] - https://www.reuters.com/business/energy/german-gas-hub-industry-talks-about-loosening-storage-rules-uniper-says-2025-02-25/
[6] - https://www.msn.com/en-us/money/other/why-europe-s-gas-storage-has-become-more-of-a-worry/ar-AA1zEeqV
