Oil may be headed for $200 a barrel and the price of everything from wheat to gold set to cause yet more ructions in world commodities markets, but for European businesses, households and governments, natural gas may be the next big headache. Like oil, the price of this fossil fuel is rising dramatically. Now EU officials and others in the industry are warning that Europe is facing a supply crunch as well, whatever the price.

Europe is “sleepwalking” its way to a “staggering dependence on imports,” Paulo Scaroni, chief executive of Italy’s national energy company, Eni, told the World Energy Congress in Rome late last year. By 2020 gas demand could be 40% higher than in 2007, at a time when production in the 27-nation EU was “expected to halve.” The result, he stated, will mean doubling Europe’s annual imports from 300 billion cubic metres to 600 billion cubic metres. “We clearly run the risk of a gas shortage in the future,” he added.

His words came shortly before the EU released its long-awaited report on a Priority Action Plan for achieving energy security in Europe. It followed a worrying stand-off two years earlier between Russia’s gas monopoly, Gazprom, and Ukraine over transit fees and gas pricing. Supplies to western Europe were cut for several days, causing an urgent rethink in Brussels about energy security, as well as the need to tackle energy integration in Europe and climate change. The Plan, launched in December, noted that Russia supplied more than half of the EU’s gas imports and suggested measures to diversify supply. It also called for expanding the continent’s gas transport and processing facilities, as well as stepped-up efforts to promote integration and investments in sustainable energy.

“One of the main tools we have to improve our security of supply is diversification,” says EU energy commissioner Andris Piebalgs. “Establishing stable frameworks for energy cooperation with potential new suppliers is therefore a priority for us.” Brussels estimates that imports will need to rise 85% by 2030.

In addition to Russia, Algeria and Norway – Europe’s other main suppliers – new sources are urgently being sought in Iraq, Egypt, Libya and west Africa, as well as from the Caspian Sea via Turkmenistan and Azerbaijan. More than €3.2bn has been allocated to help gain more imports from the Mediterranean alone.

Since the Plan was announced, the seriousness of the potential crisis has been highlighted by industry experts and analysts as well. While supplies should be “overall balanced” for the next few years, thanks in part to imports of liquefied natural gas (LNG) from Qatar, there could be a real crunch “once past 2012,” Cynthia Poynter, a senior manager for IHS, the global energy information company, told a conference in London in April. By 2020, Europe will need another 150 billion cubic metres of gas, a 27% rise over the 2007 figure of 550 billion cubic metres, according to IHS estimates.

“Given the kind of volumes of gas that Europe is going to need over the next decade and a half, it’s very difficult to see where it is going to come from,” observes Alex Forbes, senior consultant for Gas Strategies in London. Qatar, which has the world’s third largest reserves of natural gas, behind Russia and Iran, has announced a moratorium on future projects, he says, and has made it clear that it wants a diverse customer base spanning Asia, the US, and indeed other Gulf states, which are all faced with spiralling energy needs of their own.

Ironically, part of the reason for the increase in Europe’s appetite for gas is the EU’s latest environmental policies. Although a fossil fuel, gas emits fewer particulates when burned and less CO₂ than oil or coal. Power generators such as RWE of Germany, EDF Energy of France, Iberdrola of Spain and Centrica of the UK, all find themselves eager for quick fixes to their perceived green credentials and natural gas is part of the mix. Rapid economic development, particularly in south-eastern Europe and Turkey, is adding to the increases in demand, industry experts say.

In the electricity sector “there is a big trend toward gas-fired generation,” observes Stan Reid, an Edinburgh-based product manager for European gas at global energy consultants Wood MacKenzie. This will increase once “the carbon market is in place,” he adds, referring to the EU-wide cap-and-trade carbon trading system that formally begins this year and punishes dirty power generators if they pollute beyond their permitted allowance.

For European consumption, “the range of forecasts for 2015 is an increase of [between] 25 and 125 billion cubic metres compared to 2007,” says Shankari Srinivasan, a Paris-based senior director for European gas at Cambridge Energy Research Associates (CERA). “The challenge will be in obtaining supplies.” Despite the EU’s efforts to form a united front, she feels that “competition will prevent a common policy on procurement.”