While Europe most definitely requires additions and improvements to its natural gas infrastructure to assist in fulfilling demand, what would it take for the industry to find subsidies like those being made in renewables?

That was one of the issues that delegates grappled with in Paris, France at the European Autumn Gas Conference, in a session entitled “Gas Infrastructure, Investment & the Sustainability of subsidies.”

A good example of a gas infrastructure project receiving financing was the Nord Stream natural pipeline, transporting Russian gas to Germany, a portion of which recently went online.

Paul Corcoran, Finance Director at Nord Stream AG explained that the project involved five major companies and was connecting Russian reserves with the European market.

He recalled that in an opening ceremony for Nord Stream, all CEOs participated in getting the pipeline started. He said that it was 1224 kilometers long, was within budget and on schedule.

“Five shareholders produced shareholder equity, in two phases,” said Corcoran, who said the consortium had raised 6.4 billion on the market.

He said Nord Stream, whose construction had taken place in an environmentally friendly way, was constructed in sections.

He showed that a dotted section would be finished in quarter one of 2012, supplying 55bcm, which he contended was enough to supply natural gas for about 26 million households.

“Why are investors so keen?” asked Mr. Corcoran. “This is a very important strategic project for Europe, for the Russian budget and for the EU, for customers. This is only a contribution to the security of the future. We’ve heard about the long-term contracts, all participating together along the value chain.”

In summary, he said: “Given the decline in EU domestic gas production and the growing market for gas, and the environmental benefits of gas in the medium and long term, Nord Stream is a successful project that will contribute to the security of Europe for the next 50 years.”

Ann Collins, General Manager of LNG, Oil Sales & European Gas at the BG Group offered her insights.

“In terms of BG Group as an investor, we operate across the whole gas chain. We’re a global company, and in Europe a long term player making significant investments,” she explained.

“We are certainly making decisions to invest in gas, a good thing in the context of Europe’s decarbonization agenda.

She said BG Group sought to find the balance of risk and return with an overarching theme of stable fiscal and regulatory regimes. “It will be a key requirement in an economic environment which will need private sector investment.”

“Are we fooling ourselves that the market will ever provide long term price signals?” asked Ms. Collins. “These can only be part of an evaluation; more important is price forecast.”

“In deep and liquid markets like in the US and UK, investments can be made. Where they don’t exist, long-term contracts and hub markets can exist in Europe.”

In the Q&A session, she commented: “Investments should continue for indigenous gas production in Europe if the fiscal environment can be sorted out. The growth area is in Southeast Europe and it is more exposed in terms of security of supply. I would expect interconnectivity investments to occur in that area.”

Dr. Peter Klingenberger, CEO at E.ON Gas Storage asked what the status quo of gas storage was in Europe, noting that country which had the highest demand and consumption was UK followed by Germany. 

“In various storages we have different rationales,” he explained. “It’s difficult to make a general statement on all of Europe. For example, Spain heavily relies on LNG imports – what do they do if it’s full and the tanker is waiting at the port?”

In general, he said, gas storage capacity was covered by wherever there was a high import rate: “Where you’re reliant on one source.”

“What is the forecast?” asked Klingenberger, who showed the capacity of the gas storage in Europe, showing all projects underway. “We have three projects under construction,” he noted of E.ON Gas Storage. “There’s an increase of storage capacity at the moment. At the moment we are adding quite substantial capacity to be used by customers.”

He gave mention to the German government deciding to pull out of nuclear, following the Fukushima disaster, while at the same time it was proposing an enormous share of renewables.

“We believe that gas storage demand is increasing in Europe because there’s a rising importance of security; a rising share of gas imports; reliable gas supply is necessary; and stable investment conditions needed because of high capital requirements,” he said.

Mr. Barnim Piechorowski, Director for Business Development and Permitting, Trans-Adriatic Pipeline (TAP) said he believed his project was “tailor made for Shah Deniz II gas.”

In the Q&A, he opined: “I believe that the Southern Gas Corridor will be next. The time for Nabucco is too early, the needed volumes are not available. There is room for ITGI and TAP; the Southern Gas Corridor will come eventually.

“Markets have to decide on the commerciality of projects,” adding that the development of new markets could involve subsidies form the EU, like for coal fired power plants.