Here's how joint gas buying boost Europe's energy security

This week, the European Union launched a programme for businesses to buy gas collectively in an effort to secure supply ahead of the winter and prevent a repetition of last year’s record-high energy prices.

Following its invasion of Ukraine, Russia, Europe’s previous main gas supplier, reduced fuel exports to EU nations, throwing the continent into an energy crisis as it scurried to find alternate sources of supply.

The EU’s coordinated gas purchasing programme aims to protect nations from future supply disruptions and assist in refuelling gas storage.

Businesses have until May 2 to register how much gas they want to purchase through the programme. They can ask for LNG or pipeline delivery of natural gas.

In order to match demand, the EU platform will then gather offers from providers around the world. Contracts will be negotiated by matched providers and purchasers without the EU’s participation.

By November, EU nations must have 90% of their gas storage capacity filled. The plan aims to purchase fuel in bulk to fulfil 15% of that commitment. You cannot use it to purchase Russian gas.

Although it is unknown how many have placed orders, EU officials reported that about 80 companies have registered thus far. The largest oil and gas company in Poland, PKN Orlen PKN.WA, announced on Wednesday that it will participate.

The EU wants to jointly purchase 13.5 billion cubic metres (bcm) of gas at first, which is a small portion of the 360 bcm overall EU demand.

However, it should assist nations in beginning the process of filling their gas storage, which is often salt caverns or depleted gas fields.

In winter, when European gas use normally peaks, stored gas acts as a critical supply buffer by balancing variations in daily and seasonal demand. Additionally, it can provide supply in times of interruption, significant infrastructure failure, or very high demand during cold snaps.

With substantial facilities in France, Germany, Italy, and the Netherlands, as well as pipeline connections to adjacent nations, the EU has an unequal distribution of storage capacity.

According to data from Gas Infrastructure Europe, EU-wide storage is already 58% full, which is exceptionally high for the time of year. This is because countries reduced their use of winter energy due to rising prices, while emergency energy regulations and relatively mild weather also reduced demand.

The joint programme aims to increase smaller consumers’ access to gas and assist them in obtaining lower prices. Buyers can group together to reach the minimum purchase volume by placing requests for relatively small volumes, up to a third of an LNG cargo.

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