Dear Sir or Madam ,

media, politicians and consumers are aware of the increasing importance of natural gas for households, trade and industry. They are also aware of the resulting increase in our dependence on imports of gas. But to date there has little serious public debate about the issue of providing strategic support for security of gas supplies in Europe. The latest gas dispute between Russia and Ukraine demonstrates the continuing need to tackle this issue.

Crisis-proof gas stockpiling:
An issue of (no) importance to Europe?

After oil, natural gas is Europe's second most important source of energy. More and more power plants are using gas to generate heat and power. However, consumers cannot store gas. It is a line-bound form of energy that suppliers have to provide twenty-four hours a day, seven days a week. Only gas producers and importers can store natural gas on a large scale. But their interest in managing these reserves is primarily commercial, and is geared to taking delivery of a constant flow of gas but still being able to meet peak demand at reasonable prices.

Political pressure

Since Europe had only 10 percent of the worldwide annual production in 2006 and proven gas reserves are reported as a mere 3 percent, we are dependent on our suppliers - primarily Russia, Iran and Qatar. If supply problems arise, we have no strategic crisis management for emergency stocks of gas to fall back on. This situation can no longer be tolerated from an overall economic point of view. In these circumstances the member states can no longer guarantee natural gas supply security in particular, or energy supply in general, to the extent that is necessary and basically possible. At the turn of the year 2008/2009 we all observed the great political pressure that the gas dispute brought to bear on Western Europe. However, we must not be open to blackmail, and we maintain our freedom of action at all times.

Global demand competition

In future, therefore, it is essential to ensure active precautions again natural gas supply disruption, coordinated with the existing and tested emergency precautions for other energy sources. To date, the gas industry has not seen any need for such measures, as it has always succeeded in ensuring supplies over the last 40 years. Today, however, Europe is faced with ever-increasing demand competition from other countries around the world. Moreover, the recurrent conflicts in Belarus and Ukraine have shown that even pipeline transport through third countries can involve risks for our own country.

Promising solution

Today there is a need for active European management of emergency gas supplies aimed at legislation on the structure of energy stockpiling. In our brochure "Gas stockpiling in Europe", our association has put forward a number of possible solutions for discussion and calculated the relevant costs. We believe that a public-law corporation with all importers and domestic producers as its members is the most promising solution. Experience in the oil industry in various member states has shown that this would ensure reliable emergency supplies without affecting the competition situation. A statutory gas stockpiling system would affect gas prices to the extent of the additional cost involved in providing the storage reservoirs and the strategic stocks needed to fill them. In return, millions of gas customers could rest assured that even prolonged disruption of deliveries would not leave them in the cold.

Thank you very much for your attention!

"Gas stockpiling in Europe" is available as a PDF download from www.upei.org or by post from our Hamburg and Brussels offices given below.