Germany Plans $1.7 Billion Strategic Natural Gas Reserve

Germany is moving to create a state-owned strategic emergency reserve of natural gas to boost its energy security, the Economy Ministry of Europe's biggest economy said on Tuesday. The strategic government-owned reserve would require up to $1.7 billion to build the reserve and buy the gas to inject into the storage in 2027 and 2028. The emergency gas reserve would hold volumes of gas equivalent to nearly 10% of all the gas storage capacity in Germany. The funding for the reserve will come from a levy on gas consumers, the German Economy Ministry said today. The purchases of gas for the reserve would be spread over two to three years, so as not to impact the price of gas. The initial injection of gas into the new emergency reserve is expected to take place in the summer of 2027, as Germany looks to boost its energy security and avoid gas shortages and gas and power price spikes. Germany and Europe are currently racing to rebuild gas reserves in existing commercial storage after the winter left sites depleted, with gas levels at their lowest in years. As of July 6, Germany's gas storage sites were 42.88% full, according to data from Gas Infrastructure Europe. The Middle East conflict and the price spike that ensued have slowed the rebuilding of the reserves in Europe as Asia, with its higher spot LNG prices, became the most attractive destination of spot supply during the crisis. Germany has also materially boosted the share of its LNG imports as part of its total gas supply in recent years. The share of LNG imports of Germany's total gas supply rose to 12% in the first half of the year, up from 10% a year earlier, despite the shock supply loss from the Middle East due to the closed Strait of Hormuz, according to data by the German regulator. Bundesnetzagentur, the Federal Network Agency, noted in a regular gas supply report this week that 'Gas from the Persian Gulf does not play a significant role in Germany's supply, as Germany currently obtains most of its LNG from the USA.'