Europe Faces Heating Emergency This Winter After Severe Summer Heatwave... Gas Storage at 15-Year Low

EU Gas Storage Rate at 65%, Lowest in Nearly 15 Years
Qatar LNG Attacked, Gas Prices Hit Three-Year High
"Entering Winter with the Lowest Inventories on Record"

The European Union (EU) is heading into winter with its gas storage facilities the emptiest they have been in 15 years.

On the 2nd (local time), water spray is being used to cool down due to the heatwave in Lyon, France. Photo by AFP News Agency

According to the Wall Street Journal (WSJ) on September 2 (local time), the gas storage utilization rate at EU member state facilities remains at 65%. This is the lowest level in 15 years, prompting concerns that the region might face a supply emergency for heating during the winter.

Summer is typically the season for filling gas storage, but this year, a severe heatwave has significantly disrupted the process. In June and July, temperatures in many parts of Europe exceeded 40 degrees Celsius, prompting more households to install air conditioners and sharply increasing power demand for cooling. According to the International Energy Agency (IEA), about 20% of European households now have air conditioning. Over the past decade, the number of homes with AC units increased by approximately 50%, while annual sales surged by about 30% in the last five years. The heatwave also led to reduced nuclear power generation and hydroelectric generation fell to its lowest point in at least a decade, resulting in more gas being diverted for power generation instead of going into storage.

Poor judgment calls by European energy companies compounded the situation. These companies postponed gas purchases, expecting that Qatar—the world’s second-largest exporter of liquefied natural gas (LNG)—would soon resume exports. Qatari LNG is transported to Europe via the Strait of Hormuz, which has been blocked because of the ongoing war between Iran and the United States. Companies calculated that if the war ended quickly, the Strait would reopen, Qatari LNG supplies would increase, and prices would drop.

However, fighting between the US and Iran has flared up again, and even if the Strait reopens, supply is unlikely to return to normal quickly. Qatar Energy has announced, “About 17% of our LNG export capacity has been lost due to strikes from Iran, and it may take up to five years to restore damaged production facilities.” In March, Qatar declared force majeure, temporarily suspending the execution of some long-term contracts with South Korea, China, Italy, and Belgium.

A view of Qatar Energy's liquefied natural gas (LNG) production facility. Photo by Reuters and Yonhap News Agency

In the meantime, prices have surged. The regional benchmark, the Netherlands Title Transfer Facility (TTF), climbed to 74 euros per megawatt-hour (MWh) on the 2nd, the highest level since January 2023. While this is still below the record of over 300 euros set during the 2022 energy crisis, it is the highest in three and a half years. As a result, European companies are now forced to compete with Asian buyers as the winter season approaches.

Simon Turi, Head of Western Europe Gas at Swiss energy trading company MET Group, warned, "Europe faces winter with the lowest gas storage in history," adding, "Ultimately, something will have to give." The warning implies the region may pay the price for complacency—either with a surge in energy prices or sweeping restrictions on heating.

The EU’s sensitivity to global prices has been exacerbated by its shift in gas supply sources. In 2021, Russian gas accounted for 45% of European imports, but following the war in Ukraine, this share plummeted to 12% last year. In January, the EU adopted phased regulations to ban Russian gas imports, planning to halt them entirely by the end of 2027. The gap left by Russia is being filled principally by LNG, much of it shipped by sea from the United States, making Europe increasingly dependent on these maritime deliveries.

However, the "super El Nino" forecast to continue through next year may be a key variable. If it raises winter temperatures above the seasonal average, the demand for heating could decrease, alleviating some of the burden.

This content was produced with the assistance of AI translation services.