President Putin has already secured much of what he wants in a deal with Germany and the US – denounced by critics as a latter day “Yalta”. The agreement abandons Ukraine to its fate, notwithstanding a pro-forma pledge by the Western allies that the Kremlin will not be allowed to “weaponize energy flows” once Nord Stream 2 begins to flow. Mr Putin is testing the credibility of this, going in for the kill.
European gas inventories would normally be at 80pc to 90pc of capacity at this stage of September after months of summer replenishment. This year stocks are still just 58.6pc in Germany and 48.4pc in the Netherlands, according to daily data from Gas Infrastructure Europe.
The UK is higher at 89.3pc after a concerted push to rebuild reserves in August, but the total level is so small that this offers limited margin of security.
SNAM’s Mr Alverà said the British Government made a grave error in refusing to fund the refurbishing cost of the UK’s biggest gas storage cavern at Rough on the Yorkshire coast, a decision that forced Centrica to shut the facility down in 2017. “The country is blessed with the geology of the North Sea but it hasn’t used those advantages, and now it has to rely on German and Dutch storage,” he said.
Martien Visser, head of corporate strategy at the European energy operator Gasunie, said the rule of thumb in the trade is that each country should maintain reserves equal to 20pc of their annual turnover. The UK has barely 3pc, and half of this is in operational stocks at terminals rather than a crisis reserve. The country cannot last more than a few days without fresh imports if hit with another Beast from the East.
“The UK doesn’t have enough for its own demand. The real risk is going to be in February, March, and April. I am a bit concerned. The market is not sure there is going to be enough gas in Europe if there is a cold winter,” said Mr Visser.
The British Government thought it could rely on LNG from Qatar and the US to cover any shortfall. In normal circumstances this would be enough, but Covid has played havoc with LNG market
East Asian demand has pushed the spot price to all time highs $20 per MMBtu, an eye-watering level for what should be the low season. The UK will have to compete with China and the rest of Asia in extreme circumstances. “Heading into the winter season, the LNG market’s fuse has been lit,” said Bank of America’s Mr Blanch.
In principle, the UK can rely on the gas and electricity interconnectors to meet winter energy demand, with flows regulated automatically through the price mechanism. But Brussels politicised the interconnectors as a tool of pressure during Brexit talks, and French President Emmanuel Macron has since repeated the threat over fish.