MET Group is acquiring gas storage facilities — despite difficult market conditions and against the trend in the industry. ZFK spoke with Jan Massmann, who is responsible for MET Group’s gas storage business in Germany, about the strategy behind this.
The gas storage market in Germany is under pressure. With its acquisitions in the gas storage market — including the takeover of the Epe gas storage company from municipal shareholders — MET Group is, to a certain extent, acting against the industry trend. Why?
Jan Massmann: It is true that the storage business in Germany is currently operating in a very difficult economic environment. What we are seeing at the moment is very intense competition among storage operators. Building a new storage facility is currently not worthwhile — and to my knowledge, nobody is doing so.
The situation is different for existing facilities. There, the key question is essentially how efficiently they can be operated and how long this efficient operation can be maintained.
If we see opportunities there, we also acquire storage facilities even in this challenging environment. However, opportunities differ from one storage facility to another. It depends, for example, on when investments are required and what the technical characteristics above and below ground look like.
How profitable are your storage facilities?
We operate three gas storage facilities in Germany: Etzel, Epe, and Reckrod, with a working gas volume of 5.2 terawatt-hours. We have acquired all the storage facilities over the past six years, and so far the expectations we had at the time of purchase have been met.
Does your company want to reach a certain size in the market?
We look at each project purely from an economic perspective. Size in itself is not a priority for us. What matters is whether the respective project makes economic sense.
How did the fill-level requirements and their later relaxation affect you?
The fill-level requirements restricted the use of storage facilities by our customers. I do not want to assess whether these requirements were the right instrument. The fact is that Germany has come through the crisis. That the requirements are now being phased out, I consider to be the right decision. It became clear that there was speculation against these requirements, which led to undesirable market developments.
Does the current price development put additional pressure on capacity marketing?
Our storage capacities are fully booked in the long term. The prices are therefore fixed, meaning that short-term changes in the market environment do not have an impact.
Do you see further consolidation potential in the German market?
We are observing the market and continue to examine growth options. But as mentioned, it always depends on the individual project as to whether we see an economic perspective. In addition to gas storage, we generally focus on flexibility in increasingly volatile markets. This includes, in addition to gas storage facilities, battery storage systems and power plants. Despite the intense competition, we see flexibility being of important long-term value.
Do gas storage facilities not lose global importance in light of growing LNG capacities?
I do not necessarily see it that way. Changing the routes of LNG ships requires a certain lead time, and LNG enters the system in batches and needs to be smoothed out. Cavern storage facilities, in particular, are much faster and more flexible in this respect.
Without storage, one is also more exposed to price fluctuations on global markets. Storage facilities help stabilize prices and supply. That is why I am not convinced that LNG by definition reduces the need for storage facilities.