Now is the time to invest in Europe's energy security

Oil prices are hovering around $50, European parliamentarians are returning to their constituencies for the upcoming elections, and European commissioners will soon end their current terms.

These factors, along with other pressing EU policy issues, must not divert attention from the continuing challenge of securing Europe's future energy supplies. Europe needs to push forward with concrete efforts now.

The European Union's long-term demand for energy - and natural gas in particular - will continue to grow while at the same time domestic gas production is steadily in decline. The UK is a key example of this trend – until recently it was a net gas exporter but now is predicted to be 50 percent dependent on imported gas within a year and up to 80 percent dependent by 2020.

Natural gas plays an increasingly important role in Europe's energy mix. The use of gas for European electricity generation doubled from eleven percent in 1996 to 22 percent by 2007, and 54 percent of all new electricity generating capacity between 2000 and 2008 was based on natural gas.

This trend towards greater use of gas is expected to continue. Thanks to its low carbon content, flexibility in use and the efficiency of gas-fired power plants. Compared to coal-fired power plants, generating electricity from gas produces half as much CO2 and the increased use of gas will contribute significantly to helping the EU to meet its challenging climate protection goals.

The UK for example, was able to reduce annual carbon emissions by 111 million tonnes between 1990 and 2005, largely by increasing its share of gas in electricity generation.

EU gas production in the North Sea is expected to fall by 110 bcm between 2005 and 2025. However, the International Energy Agency in its 2008 World Energy Outlook stated that there are enough gas resources to meet the projected increase in global demand, but production is set to become much more concentrated in the most resource-rich regions.

Nord Stream: Crucial for Europe's short- to mid-term energy security

This makes one thing clear: security of supply will come from investment in new gas routes that will bring supplies from where they are abundant to where they are needed most.

The Nord Stream pipeline will help achieve energy security for Europe. As early as 2011, the Nord Stream pipeline – a joint project involving Gazprom, BASF/Wintershall, E.ON Ruhrgas and Nederlandse Gasunie – will start supplying Europe with a substantial share of its much needed additional gas.

The project will connect the huge reserves in the large northern Russian gas fields (Yuzhno-Russkoye, Yamal, Shtokman) directly to the European market, and will provide an additional northern supply route for gas into the EU.

Nord Stream will also contribute towards the EU's objective of diversifying its supply routes as a way of increasing its energy security. Currently the world's largest gas supplier, Russia supplies about 25 per cent of the natural gas used in the EU, and 80 percent of this gas comes through one import route.

As in any industry, it is generally considered risky for both the supplier and the customer to be so dependent on one route to market. However, it is important to note that Nord Stream is all about providing additional import volumes. It is not about replacing any existing or planned import routes.

The Nord Stream consortium is planning to build twin pipelines through the Baltic Sea from Russia to the EU, with landfall in Northern Germany. When completed in 2012, the twin pipelines will have an annual supply capacity of 55 bcm of natural gas.

This is enough to satisfy the energy demand of more than 26 million households, making Nord Stream an important contributor to the security of Europe's future energy supply. The equivalent amount transported in liquefied form by tankers would require about 600 vessels annually, resulting in an additional 1,200 ship journeys.

Nord Stream's importance to Europe has been recognised by the EU. In 2006, the EU awarded the project the highest status ('Project of European Interest') within the Union's Trans-European networks for Energy (TEN-E) guidelines.

In order to carry out this project, great attention has been dedicated to environmental issues.

Nord Stream has co-operated since early 2006 with all Baltic Sea countries in the largest cross-boundary environmental consultations ever conducted in the region. Nord Stream has invested more than €100 million in the most comprehensive environmental surveys and routing studies in the Baltic Sea.

Making a valuable contribution to the European economy

As part of its investment programme, the consortium is also providing a significant boost to the European economy.

In a time of economic downturn, Nord Stream has awarded major engineering, construction, pipe-laying and logistics contracts to European companies out of its privately-financed budget of €7.4 billion.

Reflecting its status as a truly pan-European project, the consortium is working with companies from 16 European countries in matters relating to engineering, construction, steel supply, logistics and environmental consultancy.

Of all the major pipeline projects, Nord Stream is widely recognised to be the most advanced in terms of detailed planning, engineering, design and routing, supply contracts, investment and financial set-up and submission of the Environmental Impact Assessments in all five countries through whose waters the pipeline will pass.

As such, Nord Stream is set to be the first of the major new pipeline projects to come on stream.

On the basis of the calculations presented by the European Commission in April 2008, an additional import need of 195 billion cubic metres (bcm) per year can be expected by 2025. Nord Stream's 1,220 kilometre twin pipelines through the Baltic Sea with a total transport capacity would only meet about 25 per cent of this import gap.

However, even if overall demand for gas were not to grow over the next decades, an increase in imports would still be required to cover declining domestic production, and Nord Stream would so far be the only project certain to provide additional import capacity to ensure sufficient gas supplies when the European economy stabilises.

The current economic crisis has led to a short-term fall in demand and has put other projects under pressure, such as the recently suspended Skanled pipeline.

At a time when Europe's future energy security is imperative, the significance of projects like Nord Stream cannot be underestimated. The new pipelines' contribution to the energy security will help ensure that the EU can remain globally competitive in a time of economic uncertainty.

The author is head of Nord Stream's EU representation in Brussels