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On the justified size of strategic natural gas reservesPublished: 1 of March, 2011

The end of 2010 brought along a number of substantial regulatory changes within the gas sector, generating serious turmoil within the industry due to their foreseen impact. Of these the reduction of strategic gas reserves received possibly the least attention, even though this regulatory amendment may considerably impact several gas market segments. According to the new regulation, the strategic reserve of natural gas is reduced from the former “at least 1200 ,cm working gas reserve” to “at least 600 mcm and at most 1200 mcm working gas reserve”, with the actual annual value being set by a ministerial decree by 15 January each year. And while Decree 2/2011. (I. 14.) of the Ministry of National Development (MND) published this year did not make use of the opportunity offered by the amendment of the act, leaving the former capacity of 1200 mcm untouched, the regulatory door is now open, and policy makers can – among others – reduce the costs of strategic storage and, consequently, the related fees contained by the retail gas price. This new development therefore prompted us to take a closer look at the volume of strategic gas reserve, i.e. what is the value that based on the peak daily capacity of the gas system and the consumption data of recent years would be considered justifiable.