Dutch gas reserves have shrunk to their lowest level in ten years. The storage capacity of the four underground gas storage facilities is currently only 5.8 percent full on average, as can be seen on the website of the National Energy Dashboard from gas network operator Gasunie. Stocks have been kept there since 2016. In recent years, gas reserves were on average about 35 percent full at the end of March, at the end of winter. The storage areas are now considerably emptier than normal.
Is that worrying? This question arises now that the gas market is in turmoil due to the war in Iran. The low stocks make people extra nervous, they notice at Gasunie, where they immediately received a lot of calls on Wednesday.
It is normal for gas supplies to be emptier at the end of winter than at the beginning. The stored gas is always intended for use in the winter. Like the contents of a piggy bank, they say at Gasunie.
Stocks should be replenished sometime between April and October. Market parties usually take care of this purchasing: in a stable situation they purchase gas at a relatively low price during the warm months. They can then resell it in the winter, when demand and therefore the price is generally relatively high.
The fact that supplies shrank so much this winter is partly because the winter was so cold and people therefore used more gas. What also plays a role is that gas trader Gasterra, which uses two of the four gas storage facilities to store gas, will cease to exist at the end of this year. That is why the trader has now removed all his gas from his storage facilities and delivered it to customers. While gas usually always remains in the Gasterra storage facilities, they are now completely empty.
Air conditioners in Asia
There was also less gas stored at the beginning of winter than in previous years. After the previous energy crisis following the Russian invasion of Ukraine, the European Union agreed that Dutch supplies would be at least 74 percent full at the start of each winter. However, the Netherlands had then set a more ambitious goal: 80 percent. Last winter, the Netherlands abandoned that more ambitious goal due to poor market conditions. The European target has been achieved, says a spokesperson for the Ministry of Climate and Green Growth.
Why were conditions bad? “We saw a hot summer in Asia last year, which caused people to buy a lot of gas for electricity for their air conditioning,” says BNP Paribas head of energy research Aldo Spanjer. “That also increased the price of gas in Europe. This made it less attractive for market parties to purchase gas during last year’s filling season. In order to still achieve an ambitious filling level, the government has to intervene with subsidies. That is expensive.” To prevent this, the filling level could be slightly lower than eighty percent, but not lower than 74 percent.
The fact that stocks are now somewhat lower does not mean that the Netherlands will be left out in the cold next winter. The ‘security of supply’ for next winter is not in danger, says a Gasunie spokesperson. “There are no disruptions at our LNG terminals and gas is still coming in via the pipelines. The availability of gas is therefore currently at the required level.”
However, it may become considerably more expensive to fill the storage facilities in the coming months for the coming winter. The question also remains how quickly market parties will do this. Empty gas reservoirs mean that they will have to buy more gas in the coming months to fill them up. This would cause gas demand and prices to rise.
And then there is the American-Israeli war against Iran. “You currently see that gas prices are higher, partly due to the war,” says Spanjer. “So at the moment there is no financial incentive for market parties to purchase gas now for the coming winter.” If the disruptions to the gas market due to the war continue for a long time, “the government will have to start subsidizing,” he expects.
It’s not that far yet. “The market is already slowly stabilizing,” says the economist. “When the war had just broken out, the expected gas price for the filling months was much higher than for the coming winter months. That difference has now become smaller.” Yet: no one has a crystal ball to predict the consequences of the war in Iran. If the geopolitical situation escalates further, the prospects for security of supply could change again, Gasunie also knows.
