One other interesting factor is that the UK almost ran itself into a gas emergency partially due to the mainland Europe Interconnector running in export mode virtually throughout the winter. Had the UK not exported gas then mainland Europe storage would be even lower than it is now. In particular French storage (already below 20%) would likely be in an even worse state than it actually is.

Also Gas Transmission Europe has just launched a study to report at lightning speed (by normal standards) by mid-year on how to improve the "reverse flow" network capability - ie what the hell do we do if there's no Russian Gas.

http://www.gie.eu.com/adminmod/show.asp?wat=PressRelease_GTE_Plus_Launch...

10 February 2009
Press release
GTE+ launches study on reverse flows

Following the Russia-Ukraine gas dispute last January, GTE has launched a study to analyze
reverse flow capacity needed in Europe. The work will be carried out under the GTE+ structure 1 .
The study, due by mid 2009, will seek to identify the necessary investments in Europe to enable
technically the reversal of gas flows with a view to ensure a better response to possible supply
disruptions in the future.

...Jacques Laurelut, GTE President, said: “The recent gas crisis has proved the importance of flow reversal in mitigating the consequences of supply disruption. Without doubt, the resilience of the European gas network needs to be further boosted to ensure a better response in possible emergency situations."

Undertow - my partial understanding of the situation is this. The market expects / expected nat gas prices to fall since Russian gas price is linked to oil + a delay. This seems like a license to print money . So gas storage has been sold off at high price with expectation that it will be filled again with cheap gas this Summer.

This discounts the possibility that the Russians may at some time change the rules of the game. At some point, Europe will struggle to fill storage in summer - though I'm not sure that will happen this summer - but when this does happen, seasonal price differentials will disappear.

The political perspective from the House of Commons is fascinating. At least now the opposition is asking the right questions - and this lays Government credibility on the line.

I might as well throw in this post in as well, originally from Drumbeat March 9th

Was Peak Natural Gas in 2008?

The late Dr Samsam Bakhtiari expected Peak Gas to occur around 2008/2009 (far earlier than most predicted) mainly due to the decline of Russian supergiant fields.

With Russian Gas production for 2009 down by maybe 50bcm (1.7 trillion cubic feet) before you even add in announcements such as the 240 mcf/day (7mcm/day) cut by Chesapeake, the likely decline in US production as rigs are dropped and general demand destruction curtailing production, it seems highly unlikely that 2009 production worldwide will exceed 2008 production.

So have we seen the final peak in gas as well as oil?

Some writings from Bakhtiari

AFTER 'PEAK OIL', 'PEAK GAS' TOO

(March 2006)

Secondly, a focus on energy behemoth Russia.
On New Year day, Russia's Gazprom fired a bombshell by cutting gas exports to Ukraine . This was not a one-off shot, but rather the first of an inevitable series of 'export corrections' (the second one was Georgia ).
Put in a nutshell, Gazprom's present predicament is untenable. With a dwindling production based on declining major gas fields (and no fresh giant field on tap), the Russian gas monopolist will inevitably have to curtail its exports as it cannot (or rather dares not) cut domestic supplies

THE 'SHTOKMAN' SAGA

(October 2006)

However, there is little doubt that the field will have to be developed. The world cannot do without these immense reserves of natural gas --- especially as 'Peak Gas' is knocking at the door.
But the task at hand looks awesome, if not daunting.

And for those who don't know who he was and why he might know a thing or two about Natural Gas, here he is in "The End of Suburbia".

And, to top it all off, Matt Simmons is currently going round the world telling audiences that "Europe is toast - cold toast", and that we've been "hung out to dry"

Here's that chart rescaled.

Is it possible that the companies that would build and profit from the extra storage capacity, have looked at the prospects for the uk actually getting the gas and decided that they will not be able to fill any capacity that they actually build, so have not bothered to build it?

Despite the gas situation, the uk still seems to be obsessed with new gas generation projects. Referred to in the Sunday Mail something along the lines as "the second round of dash for gas".

This from today's Sunday Times
Urgent rethink on the nuclear option

For the past decade we have buried our heads in the sand, hoping that North Sea oil and gas — now in terminal decline — and a sound industry, constructed by the Central Electricity Generating Board in its heyday before privatisation, would meet our needs. The awful reality that we will lose a third of our generating capacity over the next decade has only just begun to dawn — and it has to be replaced.

The market will only provide new gas-fired stations or, if they are very heavily subsidised, offshore wind generators. There are serious problems of security of supply with both these options. So, with a complete volte face, the prime minister now wants as much nuclear power as possible.

Submarine Methane Clathrates.
Has there been any progress on harvesting clathrates?
We had better burn them before they are released into the atmosphere.

Hello Euan & Undertow,

Yep, this is a *#$@^, rotten mess and Samsam's early predictions were widely unappreciated by Euro-politicians. Instead, they preferred to dopamine-thrill themselves by deeply-sitting on their thumbs vs moving to mitigation.

I assume your read this bit of news from today's DB:

http://en.rian.ru/russia/20090315/120566449.html
--------------------
Russia to cut oil exports, raise domestic consumption - Sechin
---------------------
My posted reply here: http://www.theoildrum.com/node/5198/482625

IF Dr. Bakhtiari's & Simmons' cold toast have any merit [Putin would know!], then my speculation follows:

IMO, I would expect Putin to have some kind of similar natgas announcements precisely timed for maximal effect when contracts start coming up for negotiation. This can help him leverage Gazprom's marginal cubic meter to greater profitable heights.

Let's say he wants Russia to quickly build, then stockpile a 5-year internal supply of natgas-sourced N-products [ammonia & urea] to enhance their national food security. Lots of other industrial chems could also be stockpiled too. It would only make common sense to do this if their natgas is downslope trending.

This could have resultant ripple effects across the pond too. Trinidad could send LNG & N-products towards Europe's higher bids, thus raising North American prices. Recall USGS Nitrogen website:

http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/mcs-2009-nitro...
--------------------
US is 48% nitrogen import reliant: 56% from Trinidad; Russia, 12%; Ukraine, 10%
-------------------
My feeble two cents.

EDIT: for spelling

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Here are some more press reports on Gazprom from the last couple of months.

The Gazprom downturn

Russian energy giant Gazprom might this year have to cut production with up to ten percent. Exports drop and the company’s revenues might shrink with as much as 26 percent. Experts now say that Gazprom might have to make dramatic cuts in its investment program.

Figures for January 2009 show that Gazprom produced 13,9 percent less than in January 2008. The company now itself admits that production figures for 2009 might be 7-10 percent lower than in 2008. That means that the company’s production might drop below 500 billion cubic meters. As newspaper Vedomosti reports, the Gazprom estimates show a 2009 production of 511-495 billion cubic meters.
...The drop in production and exports come amid the company’s intention to strongly boost results. Last year, company CEO Aleksey Miller maintained that production will amount to 563 billion cubic meters in 2008 and then 570 billion cubic meters in 2010, 610-615 in 2015 and 650-670 in 2020. Those goals now seem unrealistic.

Gazprom’s gas production insufficient

Sofia. Gazprom has published reports on its production volumes, described by the media in the country as ‘contradictory’. The Russian energy monopolist has been trying to conceal a failure to cover the projected production volumes of natural gas, Nezavisimaya Gazeta reads.

What the Russian papers say: Crisis hits Gazprom

The recent slump in natural gas consumption has forced Gazprom to slash production by 13% for a second month running, a record output cut over the past decade.
Analysts estimate that a 10% cut in Gazprom's production reduces the country's GDP by 0.3%-0.5%.

CDU TEK, the Energy Ministry's central dispatch unit in Moscow, has calculated that Gazprom's average daily gas production in mid-February was down 13.3% year-on-year.
Natural gas production has decreased by 9.9% on average across Russia. In January, Gazprom lost 13.7% in output because of its conflict with Ukraine.

Russia restricts gas

Warsaw Business Journal | 18.02.2009 | 08:45
Poland's gas supplies remain lower than contracted, but Gazprom is demanding a new agreement.
Despite the fact that Gazprom has not been meeting its contracted supply commitments to Poland, the Russian gas monopoly has demanded that the Polish government renegotiate its gas supply agreement with Moscow. Only after the agreement has been renegotiated will gas supplies via the Yamal-Europe pipeline return to pre-January levels, Gazprom officials informed Polish gas firm PGNiG.

As of last week, Poland was receiving only 75 percent of the gas previously agreed upon with Gazprom. This has been the case since the Russia-Ukraine gas crisis was resolved last month and the government warned last week that this could continue through April 30.

From Blue Chip to Fizzle

The Moscow Times
In theory, Gazprom should be one of the world's premier blue-chip companies. It owns the largest gas reserves in the world, employs thousands of highly qualified professionals, and most of Europe is its captive customer. But in reality, it appears that the company is coming apart at the seams.
Gazprom's 2009 revenue might decrease by some $20 billion due to dropping gas prices caused by the global recession, and it has asked the Russian government and foreign investors for help. The company will have to cut back on its long overdue investment program to develop new gas fields, according to media reports over the last six months. This curtailment is a serious blow because Gazprom desperately needs to replenish its diminishing reserves.

...Instead of investing in developing new gas fields and infrastructure, CEO Alexei Miller, working hand-in-hand with the Kremlin, poured billions of dollars into senseless projects -- buying football teams, building a skyscraper, gambling that Central Asian gas will make up for Russia's lagging production and engaging in theatrical, highly political conflicts with Ukraine.

It seems most of the political attention is focused on supply, instead of alleviating the waste in demand. The UK does have an aggressive new building energy efficiency program, but what is planned for the currently built environment?

In proportion to total gas consumption, Europe has approx 1/4 the storage capacity per unit consumed as the US. Storage may therefore be used differently in Europe than it is in the US, since its a more precious asset.

To look at storage balances and extrapolate a threat to supply is a huge mistake. Over the last few years significantly more flowing gas capacity has been added to the UK, simultaneously piped into Europe, from Norway. This permits Norway to flexibly move gas from the UK to Europe in response to price signals. It also decreases the need for and importance of operational storage in the UK, so long as UK producers are happy paying Continental prices for gas.

Continental long-term gas prices are still largely linked to oil price on a time lag basis. This significantly distorts the price of gas and delinks it from demand. The great purge in storage inventories during the late winter may be more likely attributed to this one cause than anything else described here. Why would a utility hold gas in storage that was purchased during days of $140/bbl oil carry the gas over to next year, when oil prices have fallen by two-thirds and look set to stay there through next winter? They would post massive losses and may lose regulatory linkage on price recovery.

Also ignored here is the flexibility provided to buyers in the long term gas contracts. Within ranges over periods of time, buyers can increase and decrease their consumption, providing a measure of storage capacity supplied by producers. Therefore it is very difficult to infer macro effects from pipeline flows without considering price signals and operational needs of consumers.

The fact is that Europe is massively oversupplied at this point, with industrial demand down by massive amounts due to the recession. Producers will be feeling the crunch with lower prices programmed into the price formulas (following oil prices down), and low to nil demand for spot gas - forcing them into max production to keep revenue levels higher to maintain exploration. To make matters worse more LNG will become available on the market as Asia lets go of excess volumes due to demand destruction in that market. This sets up significant gas-on-gas competition between traditional pipeline gas and LNG during the summer fill season.

So, from my perspective, there is no reason to be concerned about shortages this year.

UPDATE 2-Ukraine says Russian gas supply to Europe falls

KIEV, March 17 (Reuters) - Russian gas transit to Europe via Ukraine fell 43.4 percent in February to 6.4 billion cubic metres from 11.3 bcm in February 2008 due to low demand, Ukraine's fuel and energy ministry said on Tuesday.

The ministry said gas transit totalled 11.1 bcm in the first two months of this year against 23.7 bcm in the same period in 2008.

"Europe is no longer taking Russian gas as it was before," Inna Koval, spokeswoman for Ukraine's gas transit monopoly Ukrtransgas, said.

Gazprom: JP Morgan reste à neutre

• Gazprom output continues to fall in March 09, Kommersant reported today. Gazprom’s daily natural gas output was 1,237 mmcm on March 15, 25% below last year daily output. Novatek's output stabilized at 87 mmcm daily, 6.5% below early March 09, but still 4.8% above last year March average. We note, however, that we estimate Novatek is producing at least 14% below its current capacity.

• Domestic demand appears weak, export storage refilling is yet to materialize. We expected a further deterioration in output numbers from Gazprom, pointing at abnormally high demand last year and additional headwinds from economic slowdown this year. We expect domestic gas demand to run at least 20% below last year levels throughout March-May 09. Gazprom’s expectation of export sales pickup on the back of storage refilling is yet to materialize, and might be delayed until later this year, in out view.

Just an observation, the local gas storage tank, dating back from the days of town gas, has been relatively high this winter, but on Thursday/Friday last week dropped to the lowest I have ever seen it. As of today the top is now hidden behind the lower ring. Considering when extended to capacity the top is around 100-120 feet it is one notable contraction to loose over 50% of height and capacity.