Germany says Russian gas pipeline needed to ensure supply

By Nina Chestney

LONDON (Reuters) - The Nord Stream 2 gas pipeline is important to secure German energy supplies and Russia is a safe and reliable provider, Thomas Bareiss, Germany's state secretary for energy, said.

U.S. President Donald Trump has said the project increases reliance on Russian gas and has warned Western firms invested in it that they are at risk of sanctions.

Gas is due to start flowing to Europe through the pipeline at the end of 2019 and will allow Russia's Gazprom (GAZP.MM) to stop piping gas via Ukraine where it has clashed with authorities over pricing and other issues for years.

Gazprom and its partners say the project is aimed at ensuring energy security in Europe, where gas production is falling.

"I know the U.S. has concerns ... but it is not so easy. For Germany, Russia has always been a safe and reliable supplier for gas," Bareiss told the Bloomberg NEF Future of Energy summit.

"Nord Stream 2 should go on because the pipeline secures energy supply in Europe," he told the conference in London.

Nord Stream 2 will double the existing Nord Stream 1 capacity from 55 billion cubic metres of gas a year. It is owned by Russian state-controlled Gazprom, which is taking on half of the planned costs of 9.5 billion euros ($11 billion).

The rest is divided among five European energy companies - Germany's Uniper and Wintershall (BASFn.DE), Anglo- Dutch group Royal Dutch Shell (RDSa.L), France's Engie (ENGIE.PA) and Austria's OMV (OMVV.VI).

Germany is embarking on an expensive energy transition to replace coal and nuclear power capacity with low-carbon energy.

The government wants to be free of nuclear power by 2022 and has appointed a commission to decide this year on the timetable for a withdrawal from coal as part of a wider 2030 climate goal.

Bareiss said Germany will invest 50 billion euros ($58 billion) to 2030 in improving and expanding its electricity grids, but it is far behind on this.

"This is causing large costs - more than 1 billion euros a year in cost to businesses and consumers. Therefore, we have to speed up grid expansion and upgrades," he said.

"It is a very expensive transition process but it will work in the long run," Bareiss added.

The coal commission aims to bring its proposals to a U.N. climate conference in Poland in December on how many coal plants can be phased out in the next two years and then by 2030 and 2045, the minister said.

(Reporting by Nina Chestney, editing by David Evans and Alexander Smith)