Bloomberg: Europe’s crazy plan to store gas in Ukraine!

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About 60 miles from Ukraine’s border with the European Union, a collection of pipes and pumps marks what will become an important part of the European bloc’s efforts to secure energy supplies since the start of the war in Ukraine.

The Bilche-Volytsko-Uherske storage facility, located among Ukrainian farm fields and forests, can store more than four times the amount of natural gas that can be stored at Germany’s largest gas storage site.

The facility easily connected to the European bloc’s networks, thanks to Kiev’s decades-long role as a transit route for Russian energy to Europe.

The network added that storing biofuels, in a country that has been subjected to missile strikes and attacks on critical energy infrastructure, may seem like a “crazy idea”.

However, it’s gaining traction, because the facilities are far enough from the front line to be considered safe, and some traders think “it’s worth the risk”.

European officials are now considering whether to bolster links with Bilche-Volytsko-Uherske and other facilities scattered across Ukraine, home to the continent’s largest network of underground caverns, which can hold gas when demand picks up and prices go higher in winter.

With energy storage sites in the European Union approaching full capacity, currently more than 70% full, fuel storage in Ukraine could prevent a storage glut in the coming months.

A third of the storage capacity of Ukrainian facilities, amounting to 30 billion cubic meters, located at a distance of two kilometers underground, is available for use by foreign traders.

To make storing gas in Ukraine a viable solution, prices would have to fall enough to justify the costs, at a time when the European Union is likely to need to step in to provide a backstop against potential conflict-related losses.

This initiative falls within the framework of the European efforts exerted to confront the wave of panic in the energy market, which led to record prices and government interventions during the past year.

EU governments have provided 646 billion Euros ($694 billion) in aid to protect businesses and consumers, according to think tank Bruegel, and they cannot afford to repeat these costs and handouts.

Also, the operator “Ukrtransgaz” provides a third of that area, which is equivalent to about 10% of the European Union’s demand in the last quarter of last year.

With insurers moving away from Ukraine, the extent to which traders are willing to stockpile gas in Ukraine depends on prices and whether the European Union is willing to provide subsidies.

These European efforts come after warnings by the European Commissioner for Economic Affairs, Paolo Gentiloni, months ago, that the European Commission does not rule out a shortage of blue fuel supplies, and its fear of a renewed shortage of gas supplies in future periods, amid European companies’ demands to preserve gas reserves at appropriate levels.

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