The Netherlands believes the current EU system for gas storage targets ahead of winter is inadequate and places an undue burden on governments that must fund the fulfillment of EU-wide obligations.
Climate Minister Stientje van Veldhoven stated in a letter to Parliament, as cited by Bloomberg, that the Dutch government has already spent nearly $1.14 billion (1 billion euros) this summer season alone on building up inventories, a task that should primarily fall to market participants.
Despite being a relatively small EU gas consumer, the Netherlands is a significant natural gas hub and hosts the EU's benchmark gas trading futures market, the Dutch Title Transfer Facility (TTF).
The Netherlands argues that current EU rules on mandatory gas storage levels focus on storage capacity rather than consumption.
Furthermore, this spring-summer filling season has been particularly challenging and costly for EU member states due to soaring natural gas prices, exacerbated by the Iran war and the limited number of LNG cargoes transiting the Strait of Hormuz.
The price spike and concerns about immediate supply have intensified the backwardation structure of European gas prices, discouraging the storage of supply for later deliveries. Backwardation, where prompt contracts trade at a higher price than those further out, signals concerns about immediate supply.
Weeks ago, the Dutch gas network operator indicated that the Netherlands would miss its target for filling natural gas storage sites before winter, providing one of the first concrete signs that Europe might struggle to secure sufficient supply for a harsh winter.
Germany, the EU's largest economy, is considering expanding a key market incentive to encourage traders to increase gas storage levels before winter. The government is contemplating a broader application of the existing market tool, the autumn tender for Long Term Options (LTOs).
Germany possesses the world's fourth-largest natural gas storage capacity. However, as of September 24, this capacity was only 57% full, according to data from Gas Infrastructure Europe. This is a historically low level, and Germany risks gas shortages this winter if the weather proves colder than in previous years, as warned earlier this month by the country's gas storage association, INES.
