Last year, traders from the EU pumped 2.5 billion cubic metres of gas into Ukrainian storage facilities, eliminating the need to sell their surplus at a multi-billion dollar loss.
"The volume of injections has now decreased," stated Oleksiy Chernyshov, noting that traders are not accumulating as much gas as they are not expecting a significant rise in energy prices this winter.
"At the same time, we understand that European gas storage facilities are already more than 90% full, and we have enough free space in our storage facilities to offer our partners to store their gas," added the Naftogaz CEO.
Statistics from Gas Infrastructure Europe show that EU storage facilities are indeed almost full long before the winter heating season. However, European companies should be wary of actively using storage facilities, which in 2024 became a target for Russian attacks for the first time.
While the storage facilities themselves are located deep underground and are virtually invulnerable to Russian missiles, damage to the above-ground facilities used to inject and withdraw gas could pose a risk to traders.
‘The main problem is not the loss of gas, but the inability to take it away when it is needed and wanted,’ Marco Saalfrank, Head of Continental Europe Trading at Swiss energy group Axpo, told the Financial Times.
"The most important priority is to strengthen our air defence systems to protect Ukraine's energy infrastructure from enemy attacks," said Oleksiy Chernyshov, "We are extremely grateful for the help we have already received, but the need for additional protection measures remains".
Another reason for the decline in demand for storage is the high gas prices that are already in place. Traders accumulate storage in the summer months, when gas prices are cheap, and sell it in the winter months, when heating demand increases the demand for natural gas.
Last year, the difference often exceeded 20 euros per megawatt-hour, but this year it was only about 5 euros/MWh, according to Argus, a commodity market intelligence and consulting company.
And this price difference is not attractive enough to invest in large gas reserves.
Additional incentives are needed to make Europeans more active in using Ukraine's storage facilities, said Natasha Fielding, head of European gas pricing at Argus.
A senior EU official told the Financial Times that the EU could provide risk insurance funds to companies storing gas in Ukraine.
Will gas still have to be pumped into Ukrainian storage facilities?
Georg Zachmann, an energy expert at the Brussels-based think tank Bruegel, is convinced that the use of additional storage capacity in Ukraine is beneficial for Europeans, especially after the agreement on the transit of Russian gas through Ukraine to EU countries such as Slovakia, Austria and Hungary expires.
"It would create a regional deficit, but not a critical one, but more gas storage would reduce concerns, and additional reserves in Ukraine would be an ideal alternative," Zachmann said.
EU storage facilities can hold a maximum of about 100 billion cubic metres of natural gas, with an annual demand of 350 to 500 billion cubic metres, depending on weather and other conditions.
The EU's gas reserves will not be enough if something unexpected happens, Bloomberg stated.
"If everything goes according to plan, Europe will have enough gas. If the winter is normal - or even warmer than usual - and nothing breaks down, then the current reserves will be enough. In this scenario, European natural gas prices could fall significantly by Christmas or early January. Currently, the European gas benchmark, known as TTF, is trading at around 40 euros ($44) per megawatt-hour. A drop to around 30-25 euros per MWh is possible," said Bloomberg analyst Javier Blas.
"What could go wrong and thus drive up prices? First, the weather. Over the past two years, the El Niño phenomenon, which has led to an increase in global temperatures, has helped to reduce the impact of the energy crisis on the continent. But El Niño is disappearing fast, and meteorologists say the opposite weather trend, called La Niña, is likely to dominate from October or November. If so, Europe could face a normal or even colder winter," wrote Javier Blas. "The second threat is from Russia. This news may come as a shock to anyone outside the energy sector: Europe still buys Russian natural gas, including through a pipeline that runs through Ukraine. Even today, more than three years after Russia invaded Ukraine, Austria, Slovakia, Hungary and Italy still rely heavily on Moscow for gas. It is unclear whether this flow will continue after the key pipeline transit contract expires at the end of 2024. Take that gas away, and Europe's current gas reserves will no longer look sufficient."
Naftogaz is building up additional reserves
Meanwhile, Naftogaz Group has started purchasing natural gas to be stored in underground storage facilities in the customs warehouse mode.
At the same time, until the goods are cleared through customs, the transaction will not be considered an import. This will allow Naftogaz to stockpile gas that can be quickly cleared and used in case of emergency. Gas can be stored in a customs warehouse for up to three years.
The entire reserve stock will be purchased with EBRD loans of €200 million.
If there is no emergency need to use the purchased gas, it can be sold to the EU market.
"We are not talking about gas imports, but about the purchase of gas at the expense of the EBRD, which will be stored in the customs warehouse mode and used exclusively in case of emergencies and only for business needs," Naftogaz explained, adding that the group intends to meet the needs of the Ukrainian population at the expense of its own production.
"Under the planned course of events, our own gas production will be enough to meet the needs of the Ukrainian population," the company said.