Brussels calls on European banks to provide insurance guarantees for gas storage in Ukraine
Underground gas storage (Photo – press service of Ukrtransgaz)

Brussels is negotiating with banks to provide guarantees to companies willing to store their gas in Ukraine's vast underground gas storage facilities, even despite the risk that they may be destroyed, reads the Financial Times article, the state oil and gas company Naftogaz informs.

For in-depth analysis and longer stories, follow us on LinkedIn

The publication emphasizes that due to the mild winter and the lack of significant demand, EU gas storage facilities are 68% full, which is quite high for June. At the same time, Ukrainian gas storage facilities are the largest in Europe and can hold up to 31 billion cubic meters of gas.

Naftogaz can offer European companies capacity to accommodate up to 10 billion cubic meters of gas with the possibility of increasing it to 15 billion cubic meters — if Ukraine regains the territory occupied by Russia.

However, according to the publication, European business has doubts about storing gas reserves in Ukraine, even considering that 80% of underground storages are located in the west of the country, that is, the furthest from the front line.

Currently, only a few companies that are ready to accept the risks use Ukrainian storage facilities.

European Commission Vice President Maroš Šefčovič told the Financial Times that in order to encourage the use of Ukrainian storage facilities: "in addition to the competitive prices offered by Ukrainians, we must work on guarantees for international players."

The Commission is in talks with lenders such as the European Bank for Reconstruction and Development to develop this idea into a working project that will further improve Europe's energy security.

Four EU officials also confirmed the talks to the FT. A representative of the European Commission said that Brussels is communicating with governments and financial institutions regarding the provision of "adequate insurance coverage", adding that this will help "reduce the price of risk related to the situation in Ukraine".

A representative of the European Bank for Reconstruction and Development also confirmed that he is in contact with the commission.

"If the EU can develop a scheme that protects companies from potential losses related to gas storage in Ukraine, it may well encourage most of them to store gas in Ukraine," said Natasha Fielding, European Natural Gas editor at Argus Media.

She added that if Ukrainian storage becomes more popular, it could provide a larger safety cushion to cover needs in the event of extreme cold weather or any unplanned supply disruptions this winter or next.

In May, the Cabinet of Ministers approved a list of underground facilities where energy resources will be stored that will be inaccessible to enemy fire.