Russia Attacks Ukraine Gas Storage Sites، Driving Prices Higher

Russia attacked two Ukrainian underground gas storage facilities Thursday، propelling Europe’s prices higher and providing a fresh reminder of the threats to the country’s energy infrastructure. 

The facilities are still operating while specialists assess the impact of the shelling، according to Oleksiy Chernyshov، chief executive officer of state-run Naftogaz Ukrainy. Russian missile strikes also destroyed the largest power-generating plant in the Kyiv region.

Attack on gas storage sites

The attacks marked the fourth assault on Ukraine’s gas storage sites، which so far haven’t affected operations. Workers and facilities on the ground remain vulnerable and would benefit from air defense، Chernyshov said in an interview earlier this month.

The incidents highlight the potential risk for storing gas in the country، should Europe’s stockpiles become full this summer. Ukraine has more storage capacity than any nation on the continent west of Russia، and it’s actively courting traders to hold supplies there.

European gas futures rose as much as 7.1%، more than offsetting the previous two days’ losses. 

Ukraine’s storage facilities are located in the western part of the country bordering the European Union، with sites as deep as two kilometers (1.24 miles) below ground. They’re also connected to the bloc’s networks، due the country’s decades-long role as a transit route for Russian energy supplies. 

The nation’s stored gas dropped to near zero following Russia’s full-scale invasion in 2022، but it has has bounced back since last year، with companies including Shell Plc and DXT Commodities using its facilities. Naftogaz recently held talks about storage this year with RWE AG، Norway’s Equinor ASA، and France’s TotalEnergies SE and Engie SA. Germany’s SEFE is also considering storing gas in Ukraine again.

Ukraine is offering traders outside of the country to book as much as 10 billion cubic meters of its natural gas storage capacity this year، according to Naftogaz. The volume that can be earmarked for international companies comprises about a third of the nation’s total capacity and is on par with last year’s level.

Strong gas inventories

While Europe exited the heating season with unusually strong gas inventories، traders remain alert to high volatility and supply disruptions. That’s because the region now sources the fuel from a wide range of global suppliers after Russia slashed pipeline flows during the past two years. 

Separately، gas supplying the Freeport LNG facility in Texas declined overnight، according to BloombergNEF data، adding to supply concerns. The plant has been undergoing maintenance since late January and hasn’t been in full operations since early this year. 

Dutch front-month futures، Europe’s gas benchmark، rose 5.5% to €28.59 a megawatt-hour by 1:19 p.m. in Amsterdam.