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70 km off this coastline in Azerbaijan, beneath the rich waters of the Caspian Sea, lies the

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Shakhtanis gas field. It's estimated that Shakhtanis contains reserves of between 1.5

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and 3 billion barrels of oil, and up to 100 billion cubic metres of gas. In November,

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three underwater pipelines are sending the first gas onshore to the terminal at Sangachal

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for processing.

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We're actually bringing gas into these facilities right now, and in the next few days we'll

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be pressurising the gas pipeline to the Shakhtanis platform, so that's ongoing. It really is

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the hub for offshore production coming into Sangachal from the offshore oil and gas fields,

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and then it's the hub for the transportation systems that go to the Black Sea and Mediterranean

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Sea.

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For European consumers, the Caspian energy reserves and the pipelines that bring the

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oil and gas to Europe's doorstep are increasing in importance. Energy is the backbone of

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Europe's economy, driving the engine of economic stability. At present, 80% of Europe's energy

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requirements come from oil, gas and coal. The EU currently imports 50% of this, but

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that figure is set to rise to 70% by 2030, making European consumers and business vulnerable.

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The problem is our security of supply. I mean, is there any possibility of disruption?

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And when we mean disruption, we mean disruption in terms of physical disruption or in terms

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of prices.

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Both these factors came together on the 1st of January. A price dispute between the Ukraine

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and Russia disrupted supplies coming to Europe, sending shockwaves across the Union. Conflict

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in Iraq and continuing instability in the Middle East has meant unpredictable swings

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in oil prices for consumers throughout the year. So in a volatile new century, what can

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Europe do to ensure the security of its energy supplies?

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What we have to do is to grow our relationships with many other countries, particularly those

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that are energy suppliers. That is, of course, Russia, but not only Russia, also Algeria,

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for instance, the Caucasian countries and Central Asia. We think it is highly important

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that Russia remains an important supplier, but that we also diversify.

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Energy dependency may be a fact of life for the EU, but most of Europe's energy comes

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from within the neighbourhood. To the south, Algeria remains one of the EU's most important

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suppliers, providing one third of Europe's gas.

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With new agreements signed this year, there is a continuing commitment to the energy partnership

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between the EU and Algeria. The EU is set to double its energy supplies from Algeria

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in the next three years.

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Libya has already started supplying gas to Europe, and exploration is ongoing.

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With a quarter of the EU's oil and 40% of gas resources coming from Russia, a strong

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energy dialogue between the two has obviously been important, and this will continue.

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The Ukraine is a vitally important transit country for EU energy supplies, and an important

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strategic partner.

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A memorandum of understanding on energy cooperation has been signed between the EU and Ukraine,

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which significantly looks to integrate Ukraine into the EU energy market.

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Kazakhstan currently produces 1.1 million barrels of crude oil a day. That's set to

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triple by the end of the decade, and it's about to become a huge gas exporter.

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The EU and Kazakhstan have had a partnership agreement in operation since 1999, and the

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EU is seeking to work with Kazakhstan on the Trans-Caspian Energy Transit Corridor.

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Azerbaijan has had a long history in the oil business.