Dáil Éireann debate -
Thursday, 8 Jul 1982

Vol. 337 No. 7

Gas (Amendment) Bill, 1982: Second Stage.

Minister for Industry and Energy (Mr. Reynolds)

I move: "That the Bill be now read a Second Time".

The purpose of the Bill is to raise from £30 million to £80 million the limitation both on the aggregate borrowing powers of Bord Gáis Éireann for capital purposes and on the aggregate of such borrowings which may be guaranteed by the Minister for Finance.

The current limitation of £30 million is set by sections 23 and 25 of the Gas Act, 1976, as amended by the Gas (Amendment) Act, 1980. Section 23 refers to the aggregate of outstanding borrowings for capital purposes and section 25 relates to outstanding borrowings, other than borrowings out of the Central Fund, which may be guaranteed by the Minister for Finance. To date the total borrowings of the board amount to approximately £8 million and the amendments now proposed are necessary to enable them to finance the Cork to Dublin natural gas pipeline and other projects.

Bord Gáis Éireann was established in 1976 and undertook, as its first project, to pipe natural gas, which is of very high quality and calorific value, from the Kinsale Head Field to the Cork area. This necessitated an onshore pipeline and associated transmission facilities necessary for the distribution of gas to users such as the ESB, NET, Cork Gas Company and other industries in and around Cork. As Deputies are aware, this goal was achieved successfully and effectively by the board.

At the time of the decision to proceed to commercial production, the Kinsale Head Field reserves were estimated to contain 1 trillion, that is, 1 million million cubic feet of recoverable gas. This was sufficient to maintain a daily production of about 124 million cubic feet over a 20-year period and the contracted off-take in the Cork area was set at this figure in an agreement between BGE and Marathon.

Following experience of actual production from the gas field and review of its characteristics generally, the recoverable reserves have now been formally revised to 1.35 trillion cubic feet — an increase of 35 per cent on the original estimate. This is sufficient to support production of approximately 180 million cubic feet per day over the balance of the 20-year contract period. Current off-take is approximately at this level and is accounted for by an additional allocation of gas to the ESB for 1982 and 1983.

The upwards revaluation of the gas field's reserves by 35 per cent was a major factor in deciding to proceed with extension of the natural gas grid. Another important factor was the report of the Town Gas Review Committee which concluded that there were distinct advantages, both in economic and energy terms, in allocating a maximum proportion of the natural gas resource to the premium markets in the Dublin area and other populated centres, especially those with existing town gas industries. The present Government approved such a policy because of their emphasis on more efficient and economic use of natural gas, savings on imports of premium fuels such as gas oil, revitalisation of the town gas industry and because it will make available to a large sector of the population an indigenous premium fuel. I wish to see the natural gas grid extended to as many areas as possible outside Dublin where this can be done economically and efficiently.

Clearly the construction of the Cork to Dublin pipeline is the first priority and will form the backbone of the national gas grid. The contract for the construction of the Cork/Dublin pipeline to Dublin City Gate has been awarded to the Irish/Dutch consortium of Irishenco/Nacap at a cost of £27.4 million. The overall cost of the project is expected not to exceed £45 million. This includes the cost of acquisition of wayleaves, engineering, communications and other related projects not covered by the pipeline construction contract itself. When provision is made for construction of the link from the City Gate, beyond Clondalkin, into Dublin Gas and the ESB, the overall cost of the project is estimated at under £60 million. Contracts for both parts of the link into the city from Brownsbarn to Grove Road on the canal and from there to Dublin Gas and the ESB, have just been awarded to the Irish/UK joint venture of Murphy International/Murphy Pipelines. All projects are expected to be completed in time to have Kinsale gas flowing into Dublin by early next year.

Deputies will appreciate that the most efficient use that can be made of the Kinsale field is to maximise the availability of gas for the premium domestic market and for use in industry and commerce generally. As I indicated, the displacement of imported premium fuels such as gas oil is a primary aim. The central heating market in houses, offices and factories will be an important area in this strategy. After that we must look to the availability of gas for direct use in industry. While these markets are being built up, the sale of residual gas to the ESB will contribute quite significantly to the economics of the pipeline and will generate additional substantial revenue for BGE and the Exchequer. Moreover, the availability of gas to the ESB will help to stabilise electricity prices to the consumer and save on oil imports thus assisting our balance of payments. Current savings on imports from all sales of gas by BGE are running at £200 million and will increase over the next few years as the gas grid is expanded to replace the maximum amount of premium fuels.

It is estimated that the allocation to Dublin Gas alone would reduce our energy import bill during 1983 by about £17 million on present consumption levels. As Dublin Gas are confident that they can expand the market for gas by six to eight times the present level, savings on imports by the end of the decade should be very significant indeed reaching a level of about £80 million a year in 1982 terms. On the financial side, it is the Government's intention that the estimated cost of the entire project, that is, £60 million should be 30 per cent funded from BGE's own internal resources. This provides a reasonable level of internal funding while ensuring that a substantial proportion of BGE's surplus arising from the sale of gas will accrue to the Exchequer. The remaining 70 per cent of capital investment will be mainly funded by borrowings from the European Investment Bank on terms which are currently being negotiated. This will leave a proportion of borrowings to be raised on the home market in a manner still to be determined.

I said earlier that our primary objective is to bring gas to Dublin. This is as it should be. An improved gas supply to the existing market in Dublin and the availability of Kinsale gas at competitive prices to new customers will ensure that the premium market is exploited quickly and efficiently. Because of this I was pleased to be able to announce recently that agreement had been reached between Bord Gáis Éireann and the Dublin Gas Company on the main provisions of a contract for the supply of gas. This will clear the way for Dublin Gas to receive supplies from Kinsale in January next year, but, as I also said, we must cast our sights beyond Dublin. I am anxious that other towns should have Kinsale gas. I am particularly concerned that existing town gas companies should be given the opportunity to get Kinsale gas where practicable. Town gas companies such as Limerick, Clonmel and Waterford either have had consultancy studies carried out or have such studies in progress. In addition BGE have recently completed preliminary route studies on possible spur lines to Limerick and Waterford and these studies are being considered at present. While I am not now in a position to give a time scale for the completion of this essential planning for the second phase of the development of our natural gas grid, I can assure Deputies that it is being progressed as quickly as possible having due regard to all factors involved.

Deputies will of course be aware that Cork Gas Company are already receiving supplies of natural gas. At present the company are using the gas as a feedstock for the manufacture of town gas. I hope that the company will be in a position to complete their programme of conversion to direct use of natural gas as quickly as possible. I look forward to seeing substantial growth in their volume of sales and simultaneous expansion of their distribution system as natural gas becomes available direct to the consumer. Indeed, BGE are now anxious to proceed to the quick conclusion of a contract with the company in order to facilitate these developments. Concrete progress has been made and I hope to see the matter brought to a conclusion shortly.

The extension of the grid has also presented us with a valuable opportunity for positive and worthwhile co-operation with the North. I recently met with Mr. Adam Butler, the Minister of State with responsibility for energy matters at the Northern Ireland office, to discuss a possible supply of natural gas for Northern Ireland. The discussions covered supply schedules, duration of contract, price, price review mechanisms, capital investment and transmission costs. We reached agreement on the main terms on which gas could be supplied to Northern Ireland and the Minister of State and I will be recommending these to our respective Governments. We should be in a position to deliver gas to Northern Ireland during 1984.

This will be a very significant extension of our gas grid and I am confident that the very great benefits to be derived from it will be quickly reflected in our balance of payments.

The whole development programme which I have just outlined will require quite considerable capital expenditure on the part of BGE. As I have explained, this will be met partially from surplus revenue from the sale of natural gas and partially from borrowings to be raised by BGE. Over the next few years, as the various stages of development take shape, I anticipate that borrowings not exceeding £80 million will meet BGE's requirements.

This type of capital investment is to be welcomed because of the substantial benefits which can be expected to accrue to the economy. I have already outlined some of these benefits. Other immediate benefits which should also be mentioned relate to the very high level of Irish input into the project and the jobs it provides. During the period leading up to the commencement of the construction phase, there was great awareness of the need to maximise the Irish content. The co-operation of the IIRS, the Confederation of Irish Industry and others, was a major effort to ensure that the opportunity for use of Irish goods and services was highlighted. As a result I am pleased to be able to tell the House that, notwithstanding that the major items, that is the pipe and fittings, had to be manufactured abroad, 60 per cent of the value of the pipeline project will be sourced in Ireland. In terms of jobs this means that 700-800 Irish people will be employed on the project overall.

The building of the works main into Dublin city and further extensions of the grid which I have mentioned also promise substantial employment as the various projects get under way. That this level of home input should have been achieved on a project of a type and size new to this country is a tremendous tribute to all those who contributed in bringing it about. We must not overlook the immense benefits to town gas enterprises. As I indicated earlier, the distribution of gas through these enterprises will revitalise what was an ailing industry; give security of employment to workers; provide opportunities for investment in what is becoming an expanding industry with bright prospects and provide a unique opportunity for private industry to co-operate with the State in maximising the distribution and use of Kinsale gas.

I think we all appreciate the importance of the Kinsale Head field as a natural resource. As I have said, the most effective use we can make of it is to have it quickly and widely available for use in the premium markets, principally domestic use, and after that, commercial and industrial use. The whole project is a formidable one based on an indigenous resource which can sustain itself. I am confident that the House will support this Bill which is designed solely to enable the board to borrow for the project. I therefore recommend the Bill to the House.

Mr. P. Barry

We welcome this Bill and I take some pride in being able to say that this is the only amendment to the Act since it was introduced in 1976 and the amendment is to increase the borrowing powers of BGE. Given the fact that this was at the time a totally new undertaking by the Irish Government to introduce legislation to deal what was then and unfortunately still is this unique indigenous source of energy, the Act seems to have stood the passage of time fairly well, except in this one regard of increasing the borrowing powers which may have been increased once before, but that is all. At least if there are defects in the Act they have not shown up in its operation in the last six years.

I will recall very briefly to the House the circumstances in which the last Bill was introduced. It coincided with what was perhaps the most unhappy period for this country since the Second World War, and that was the energy crisis of the early seventies. This find of natural gas off the south coast of Ireland was a challenge and a hope and it gave a sense of optimism in what was otherwise a very bleak field. We had moved through the sixties fuelling a very impressive industrial expansion on the basis of cheap energy, cheap oil prices from the Middle East and that came to an abrupt and shattering end in the autumn of 1973 at the time of the first flexing of OPEC muscles. I was charged at the time with the responsibility of deciding on the use of this natural gas which was then, as the Minister said in his speech, estimated to come out of the ground at about 125 million cubic feet a day which has been increased to 180 million cubic feet a day. The problem then was to get the maximum benefit into the economy as quickly as possible while negotiating a contract with the developer of the field at the cheapest possible price. Naturally, there was a relationship between the speed at which the gas could be taken out of the ground and used inside the country and the price to be paid for the gas used. If the developer was not to see a return on his money for 50 or 60 years or if the gas was to come out of the ground at a slow rate, say 20 or 30 million cubic feet a day, then the price would be higher. It is generally accepted now that the negotiated price for that natural gas was extremely advantageous to the country as a whole.

The Government were faced with the task then of finding major users for the gas so that it could be brought ashore and the contract that had been negotiated with Marathon made effective as quickly as possible. It was decided that there should be two major users, the ESB and the NET factory at Marino Point in Cork. There was a lot of criticism at the time in the House and outside it. One criticism was that the figure of £25 million included in the 1976 Bill was too small for the task An Bord Gáis were given. The other was about using such a large proportion of the field for the generation of electricity. The only two amendments to the Act were the one we have before us tonight and the one in 1980 which increased the borrowing powers of the company to £30 million and now to £80 million for a specific purpose. Therefore the House should accept that the original figure was correct.

There is a benefit not only for this company but for the ESB and many other State companies. Where borrowing limits are written into Acts they should not be so substantial that the affairs of the company do not come before the House for discussion for a number of years. It is better to write in amounts of money which bring Ministers back to the House with amending legislation to allow a discussion on the activities of the companies in relatively short periods of time. By that I do not mean every 12 months. That would not be realistic. They should have to come back to us every two or three years. Unfortunately we are having a truncated discussion on this Bill tonight because of pressure on Dáil time. It would be useful if every couple of years Ministers had to justify the activities of companies over the previous two or three years. This would give an opportunity to many Deputies who would have useful things to say about the operations of those companies.

The other point is the allocation of natural gas to the ESB for the generation of electricity. There are two sides to that argument. One is that it should be used as directly as possible, and that the wastage which is alleged in the use of natural gas for the generation of electricity should be avoided. That was one of the things which had to go on the scales when the decision was made nine years ago on how to use this gas. On the other side of the scales was the benefit to the economy of getting this cheap gas in 1973 terms and in 1982 terms into the economy as quickly as possible.

There is a legitimate policy difference between individual companies and the Government. I know my point of view is not held at present by the establishment, referring in the broadest terms to the Government and the civil service. A beneficial use of this natural gas is to give it to the ESB at its contract price and allow the benefits of a cheap energy source to be fed into industry. I know there are legitimate differing viewpoints on that. I should like the Minister to tell me exactly what the Government's policy is with regard to the pricing of natural gas for electricity consumption, for the gas consuming companies and for industries outside the State sector. I gather the policy is a pragmatic one, that is, to charge what the traffic can bear to each individual user.

When the Minister announced the conclusion of the contract between An Bord Gáis and the Dublin Gas Company, he said this would mean a benefit of 30 or 40 per cent to the consumers of gas in the Dublin area. He may have been making that assumption on the basis of the gas being given to the Dublin Gas Company at a contract price from Marathon, or a near contract price plus an addition for the conveyance of the gas. He may have meant it was a real profit to An Bord Gáis, or that it was the energy-related price. There is an argument to be made for each of those pricing policies. If an energy-related price is being charged to the Dublin Gas Company, and if it were to be extended to all users of gas, that closes off the option for the Minister to give a hidden subsidy to some sections of industry, such as NET, if they are to be charged on the same basis. There should be clarification on that point.

With regard to the contract the Minister signed with the Dublin Gas Company, the following morning the papers said something to this effect: "Late last night or in the early hours of this morning this deal had been concluded with a benefit of 30 to 40 per cent for the Dublin gas consumers." The previous night on the 9 o'clock news the Minister had an announcement to the effect that a contract had been concluded. This was at the time of the Dublin West by-election. At the time there were large advertisements in the papers from the Dublin Gas Company extolling the virtues of natural gas and the benefit it would be to the population when it was piped and used by the company.

It has always been the practice that, as far as possible, State companies should be allowed to run their own affairs. The philosophy behind the setting up of State companies was that they should be separated from political control and allowed to do the correct thing within the terms of reference laid down in the Act under which they were set up. It is regrettable that in this instance the Minister's enthusiasm to gather votes in Dublin West led him to forget his better judgment and make an announcement before the deal was concluded. If my impression is wrong, the Minister may correct me. That was the impression I got that weekend. If the whole thing was coincidental, I must congratulate the Minister on being fortunate enough to be in the right place at the right time, but unfortunately not getting the right result.

The decision to extend the pipeline to Dublin is correct, even though I would have had some doubts about it on the basis of the original estimate of the size of the field. The fact that it is approximately 50 per cent greater than was originally thought presents An Bord Gáis, the Minister and the Department with the problem of how to use it under the terms of the contract and get major users to absorb it. On balance, extending the pipeline to Dublin was the correct decision. The contract price for the laying of the pipe seems to be extremely good. A good job was done there. I was glad to hear the Minister say there would be a large Irish input of workers and material in the laying of the pipeline.

I am going to make a suggestion with which I hope the Minister will agree and maybe do something about. For political and economic reasons the extension of the pipeline to Northern Ireland is a good idea but I hope we might even go beyond that. As the Minister will remember, there was some controversy last year between politicians in the North and the United Kingdom Government about the desirability of connecting the North of Ireland to Scotland and tying into the United Kingdom grid. If we are going to extend our pipeline into the North, and have a grid covering the entire island, the economics at least should be looked at and talks entered into with the British Department of Energy on the feasibility of our funding the laying of that pipeline from the nearest point in Northern Ireland to Scotland allowing us to enjoy a common grid and buy our gas back from the United Kingdom. That makes economic sense. It would be a great benefit to have the system running not just between these two islands, but at a future date, through all Europe. We should suggest to the United Kingdom Government that we would be willing to fund the laying of a pipe between the nearest point in the North of Ireland and Scotland if they would agree to see us back natural gas.

The benefits are obvious. It would give us a much bigger pool of gas to draw on, it would allow us, with confidence, to extend our grid to not alone Dublin and Cork but along the east coast from Dublin, across to the west coast through the Golden Vale, Limerick, Shannon, Galway and on to Sligo. We heard of the unfortunate experience with the interconnector in Northern Ireland and I will deal with that on another Bill, but I would not be deterred by that unfortunate experience.

I urge the Minister to press ahead with negotiations with the United Kingdom Government on the laying of this pipeline. The profits, if An Bord Gáis are allowed to keep them, would appear to justify the laying of that pipeline. I made an inquiry about this in the last few days and was told the laying of the pipeline under water would be four times that laid over land. If the crossing between Northern Ireland and Scotland is about 20 miles, it would cost between £40 million and £50 million to lay the pipeline. Given the projected profits, that would not be outside the capabilities of the gas company to fund.

Despite whatever internal financial problems the United Kingdom Government may have — if my memory serves me rightly that was the reason they gave for refusing to build the pipeline — they should put them aside if we are willing to build the pipeline, and allow the gas to be supplied to the North. The decision by the Irish Government to extend the pipeline to the North will show their concern for the economic development of the people in the North. Its advantage to the Irish Government would be that we could take part in a grid which would encompass both islands and give us the confidence to extend the grid to other parts of the island.

I want to pay a tribute to the IFA and the ICMSA for their co-operation. We are frequently told that the people of Ireland are conservative and that there is no more conservative body than the farming community. When I was engaged in the negotiations of the wayleaves for this pipeline I found both farming organisations extraordinarily open and appreciative of the necessity for them to co-operate for the benefit of the industry and towns in having gas pipes laid through their land. There has been some agitation since about the method of laying the pipeline from Cork to Dublin, but it does not appear to be affecting the laying of that pipeline, I think it is going ahead on schedule, despite some very public protestations on behalf of a very small number of people who I do not believe represent either the IFA or the ICMSA. I appreciated at that time, and I am sure every Minister for Energy appreciates this too, that it was possible for An Bord Gáis to negotiate with the parent bodies about the laying of wayleaves through land and that that agreement was abided by to the letter by individuals of the associations whose lands were affected.

It is general knowledge that every gas company, bar one, in this country have had problems in recent years. Their saviour will be natural gas. I am pleased to see from the Minister's speech that the Cork Gas Company are using natural gas and converting it into town gas, and that they are proceeding with the programme which will mean the conversion of appliances to take natural gas in its raw state. This will mean a huge capital investment because the pipeline under the ground will have to be treated as well as the home appliances. This is even more so in Dublin because the Dublin plant has not been kept as up to date as the Cork plant.

In the original Act there is a section that allows the Government to invest in gas undertakings. These undertakings are divided into two categories. There are those like the Limerick Gas Company, which is owned by the local authority, and there are others that have a normal shareholding and are quoted on the stock market. These are in Dublin and Cork. It would not be an unnatural extension of the role of An Bord Gáis to have a greater say in the end distribution of gas. That is easy for me to suggest from the Opposition benches but it presents enormous problems not only for the Minister's Department but also for the Department of Finance. The benefits of the gas at any stage will be huge and we should make sure that the public get the benefit.

In his speech the Minister made the following comment:

On the financial side it is the Government's intention that the estimated cost of the entire project, that is, £60 million, should be 30 per cent funded from BGE's own internal resources. This provides a reasonable level of internal funding while ensuring that a substantial proportion of BGE's surplus arising from the sale of gas will accrue to the Exchequer.

I am not sure what this means. Is it the intention of the Government in future to take an amount in excess of the 30 per cent used for building pipelines and other capital undertakings into the normal revenue of the Exchequer or is the Minister counting that 30 per cent as part of the general capital investment by the Government? In his speech the Minister stated:

The remaining 70 per cent of capital investment will be mainly funded by borrowings from the European Investment Bank on terms which are currently being negotiated. This will leave a proportion of borrowings to be raised on the home market in a manner still to be determined.

The sums do not add up and I should like some clarification on the point. Probably there is a simple explanation but it is not clear from the speech and I should like the Minister to enlarge on that matter. Will the board have their profits creamed off by the Exchequer on an annual basis? This could be a method for future Ministers of Finance to manipulate the price of gas so that more revenue would accrue to the Exchequer as a kind of hidden tax. I do not greatly object to that and some Minister might argue it would be a good thing. My point is that we need much clearer policies on the matter.

The budget had a sum of £28 million included in it, the amount of profits of BGE. If the profits next year are £200 million, will the Government take that into their budgetary arithmetic in January 1983? Will the policy always be to take whatever surplus cash the Government decide the board have and use it to finance general day-to-day spending? Is what has happened with regard to the £28 million a once-off operation or will a fixed sum be taken every year? Would it be more desirable for the Government to forget about the profits of BGE, to allow the profits to be reined in and give the consumer the benefit of cheap energy? All these matters have not been discussed adequately. The position has arisen this year because it was only at this time that the surplus was thrown up. However, the matter is of concern not just to the Government. If enormous profits are generated by BGE, Members of this House should have an opportunity to debate how to use the profits to best advantage.

My own preference would be to use the gas as a cheap energy source for industry and I make no apologies for that. Other European countries adopt this approach. We will not progress unless we have an enormous increase in exports in the years to come and we cannot have that increase on a level that will absorb our young unemployed unless we can sell our goods at competitive prices. That means controlling the cost of producing goods but one of the major costs in the last eight or nine years has been the cost of energy. I am sure the answer I will be given will be that the EEC will not allow it. There are very many things the EEC do not allow but nobody seems to listen except the Irish. In other countries a subsidy is given to industry by providing energy from natural resources at prices that are not energy-related even though EEC policy is that all energy should be charged at oil-related prices. This is done for conservation purposes. I do not believe that is happening in other countries.

I do not know but I think the pragmatic approach is probably the policy at the moment. In other words, each user is charged a different price depending on ability to pay. Thus, NET who have not the ability to pay, get the rock bottom price plus some administration charges; probably Cork Gas, the next user, pay the top of the market price which may be still below the price of naphtha, the most expensive commodity for making natural gas, and the ESB get a price somewhere in between.

If BGE are engaged in a policy of this kind, are they doing so of their own accord or do the Government make decisions by instructing them what to charge each customer? If we continue with the pragmatic policy which I think is the policy at the moment, it will be very difficult for Members of this House to judge if BGE are operating efficiently. If we have the energy-related price, the Exchequer will get the benefit of huge surpluses of profits from BGE. If that is so, I think that very shortly the Minister for Finance or the Government should state that this is the policy that will be pursued for the future, that BGE will charge an energy-related price and that the profits of the board will be taken into the general revenue pool. The policy that I would pursue would be to ensure that the benefits would be given indirectly to industry, either by way of cheap gas for the ESB to allow them to maintain or even reduce the price of electricity or as a feedstuff to industry at a special price that would allow industry to produce goods at very competitive prices and thereby boost exports.

The four points, then, to which I should like the Minister to refer are: first, the pricing policy of BGE, secondly, some explanation on the funding, thirdly, the question of the desirability of at least examining the possibility of BGE having some say in the end distribution of the gas through the Gas Appliance Company; and, lastly, the question of an approach by the Minister or the Government to the British Government to allow BGE to fund an Irish Sea crossing so that the Irish grid which could then be very much extended and the British gas grid would be cross feeding each other.

Mr. Sherlock

Deputy Barry has covered the ground fairly well. Indeed, he has stolen some of my thunder on this issue. I welcome the many decisions that have been made by the Government to enable BGE to develop their programme, in this case the laying of the pipeline. One is rather surprised to find that, although this recently established State board have shown a considerable profit, in order to undertake the project we are talking of they must go on borrowing. One questions whether that kind of policy is the right policy to allow the board to adopt in view of the fact that the quickening rates of interest on borrowings are bedevilling the whole industrial development.

It is surprising, too, having regard to the figures given in respect of savings in the importations of fuels, that the ESB as a result of being able to buy gas from BGE are not in a position to reduce the cost of electricity. People are not able to pay their electricity bills.

The other point I wish to make is that the purposes for which the gas is being used constitute a waste of gas of the high quality involved. Perhaps crackdown could be used for the development of petro-chemical industries and, as has been mentioned, for feedstock for industry.

I should like the Minister to tell us whether BGE have any policy in this regard.

There is concern in the Mitchelstown-Mallow area about the failure of the board to provide the spurs for the eventuality of high industry in that area being able to avail of the gas. I understand that a request made through the local authorities in this regard was not acceded to.

The Minister has stated that the employment content of the project will be between 700 and 800 people. I am wondering where he got those figures from since the indications in respect of the development under way at present are that there are very few people employed and that there will not be any great amount of employment in the laying of the pipeline. This is the message I have been getting from the people in east Cork who have been seeking employment. Is there some further development to take place that will bear out the sort of employment figures the Minister is talking of?

Like the previous speaker, I welcome also the Minister's statement regarding co-operation with the North in this matter with a view to supplying natural gas to that part of the country.

Mr. B. Desmond

One has some difficulty in assessing current Government policy in relation to BGE. There has not been very much to go on in the past two or three months. However, in fairly global terms I shall put the views of this party on the matter.

At present NET are getting about one-third of the field's output. For that information I am relying on the data that was available to me when I served as a member of the Joint Committee on State-sponsored Bodies. In crude terms the ESB get the other two-thirds and in between there is a percentage to Cork gas and another to commercial users, though not very much in terms of the total output. Roughly speaking NET get the gas at what I would classify as the energy-related price per therm. I am not breaching any confidentiality when I say that there is available published information relative to royalties. This shows that NET pay a third of the price on an energy-related basis.

There is a massive price transfer subsidy from the field which, in turn, is severely reflected in the accounts of NET in so far as it protects the losses of NET from being as substantial as they would otherwise be. Also — and this is a matter of serious national policy — it constitutes a major subsidy of the exports of NET; the subsidy is exported. I will not indulge in the convolution that occurs there in the context of foreign farmers getting Irish fertiliser under the common agricultural policy on subsidised Irish gas input and feedstock. But it is a factor we must consider seriously. In any event NET receive a massive subsidy per therm.

Speaking in very crude global terms, as I understand it, the ESB — I have not my notes with me here — would be paying what I would regard as half of the energy-related price; my energy-related concept per therm is in the 30 pences and, crudely speaking, the ESB are paying half. That is as I see the situation obtaining. A quarter of the ESB's total feedstock is natural gas, again my surmise. Therefore, there is a major subsidy from the field on a price transfer basis to the ESB. Arising out of all that arithmetic — which comprises a two-thirds transfer pricing subsidy to NET and a 50 per cent transfer pricing subsidy to the ESB, the profits of Bord Gáis this year will be approximately £30 million; having done all that they will still make £30 million in 1982. I would estimate that next year Bord Gáis will make between £40 million and £50 million profits; this year £28.5 million will go to the Exchequer and next year I suppose the Minister for Finance could pick up anything between £40 million and £45 million, probably at the top, £50 million. Were the subsidies not being given and were the two main users being charged the full energy-related price, not necessarily an oil-related price but broadly related price, Bord Gáis probably would be returning to the Exchequer this year, am I wrong in saying, £100 million, which would be reflected in this year's budget?

As a former member of the Joint Committee on State-sponsored Bodies, speaking with hindsight, we very nearly got round to discussing Bord Gáis and to reviewing their operations. The kinds of questions I am posing now are those I remember I was willing to ask had the second last Dáil lasted and had we got round to debating the issue of Bord Gáis. The reason I pose those questions and mention those broad, crude facts, which I do not think are that inaccurate, is that as far as I am concerned what should happen in relation to Bord Gáis is that NET should be charged the full energy-related price per therm for their feedstock by the State, by the Government, through the contract mechanism. I shall go further and say that I am strongly of the view that, if we are to develop a coherent energy policy and a natural gas policy — one which will last for 20 years because that is the life of the field — the ESB should be charged the full energy-related price for their feedstock — no messing. That would mean that the Minister for Finance, the Minister for Industry and Energy, the Government of the day, would have, this year, £100 million, next year £120 million, £150 million, £200 million and so on; then, consciously and deliberately we decide.

The price of electricity is very dear, the ESB are experiencing difficulties. They have a price increase application with the National Prices Commission requiring sanction. They want to put up the price of electricity: all right, give them an Exchequer subsidy, a subsidy through the Cabinet mechanism, from the Minister to the State body, when one will have control over the situation. Admittedly at that stage the board of the ESB will be beside themselves with anger, frustration, denunciation of the Minister and four-letter expletives will emerge from each member of the board towards the Minister but we would have control of the situation. Through a process of quite deliberate subsidisation by the State, if it is deemed to be desirable by the State in the decades ahead, the price of electricity will be kept down. The State might decide quite consciously and deliberately that, as far as industry is concerned, a higher proportion of subsidisation will go to the industrial user of the ESB as distinct perhaps from the domestic consumer, a conscious decision by the Government. The options will not reside in the internal pricing policy of the board of the ESB which, by the way, I think we all concede is a highly efficient State-sponsored body. By and large I have no quibbles with its general productivity and efficiency, as such; it is one of our better State-sponsored bodies.

Likewise Nítrigin Éireann Teoranta, I argued passionately in regard to NET at that Joint Committee on State-sponsored Bodies. It has been suggested that we have been giving a subsidy to NET over and above their losses, that we have been giving them a gas subsidy by virtue of charging them approximately one-third of the energy-related price, a subsidy of £25 million to £35 million a year to produce fertilisers to export, for farmers to put on land so as to obtain benefit from the common agricultural policy against Irish farmers. If we decide it is necessary and desirable to keep NET as a fertiliser-production unit, that we want to keep the jobs going in Cork and Arklow, a conscious political and Government decision that the board of NET should have a transfer State subsidy to meet their losses, fair enough, that is a political decision, a Cabinet decision.

In the context of the management of our State-sponsored bodies they should pay the full price with no hidden subsidies. When Aer Lingus or CIE get fuel, the ESB get natural gas, or any State-sponsored body avail of the resources of the State, they should pay the full price. Everything should be explicit rather than implicit. It should be known what they are paying for their feedstock and are getting explicitly from the State by way of subsidisation. There is nothing wrong or immoral about subsidisation. It is nothing to be ashamed of but such a change would be good for the morale of An Bord Gáis.

Now that the contract has been agreed between the Minister for Industry and Energy and his colleague in Northern Ireland, Mr. Adam Butler, the terms of it should be revealed. There is undue secrecy here about what we are up to in terms of energy and Government contracts. I am a firm advocate of normal commercial confidentiality to protect the interests of State negotiations. I do not believe we should behave in an irresponsible way in those areas but now that the contract has been agreed the main terms of it should be made public. Our people have the right to know. It is likely that the Minister has got a good deal but the terms of it should be out in the open. The price which NET pays per therm for the natural gas should be made known and so also should the price the ESB pays.

The accounts of State-sponsored bodies and the reports of An Bord Gáis should contain that information. It would get rid of a lot of speculation and rumour and put everybody on to a footing of reality rather than a footing of financial press speculation. Admittedly, if the British Government said they did not agree that the terms should be made known I would respect that and would not ask that the terms be disclosed, but if that is not the case the terms should be made public. I do not think the Minister would be unduly concerned if he is accused of selling an Irish natural resource to the North at a give-away price because I know he does not indulge in that area.

The budgets of the next few years should give a full revenue return of An Bord Gáis and we should be told what proportion of the revenue of the board is devoted to the ESB and so on. The consumers will then know what they are getting. There is the other alternative, what one might call generally unappreciated transfer price subsidies, but in the long run, it is not good. I agree with many of the observations made by Deputy Peter Barry in regard to the construction work done from Cork to Dublin. It proves conclusively that we can match international technology and use a natural resource effectively. We can hold our heads high in regard to this work. We have a magnificent natural resource in the form of the 1.35 trillion cubic feet of natural gas but we have to conserve that in a rational way. The Irish people must be told that this is not to be frittered away and that, notwithstanding that we have this resource, its value and its worth to the Irish people is so great that it cannot be dispensed cheaply. People have been told that the price of gas and electricity will be brought down and that everybody will benefit enormously from the gas find but we must exercise a cautious and careful national resource policy. Some of the points I have made may be unorthodox and painful for the consumers but I do not think it would do any harm to impose those views. A former Minister responsible for Energy, Deputy O'Malley, who never courted popularity, would, I am sure, share my views on this. I never discussed the matter with him but I know he was always prepared to put the realities directly to the users and the boards concerned. I believe it will be possible to reach consensus on this vital natural resource and use it in the national interest.

Mr. Kemmy

I should like to take this opportunity of welcoming the setting up of An Bord Gáis by the last Government. It was a very good move. I welcome the initiative of that Government. It may be said that it was a bit late in the day to set up such a board and that it should have happened decades previously but, like so many other things in Ireland, it was better late than never. It was appropriate that the new board was established by the last Government to advise and plan our energy needs in the years ahead. The Minister must have the best expertise and advice available in regard to this area because he is working in a jungle of multinational oil companies who have tremendous experience, power and influence in dealing with energy and making money throughout the world. The Minister has considerable experience in the business field and that is a great asset but it is important that he has the best advice available at all times. I have had some experience of dealing with the new board and the people I met impressed me a great deal. They are skilled and talk intelligently about our energy needs.

The Minister is fortunate in having these advisers available to him. The record of An Bord Gáis is good. By all accounts their operations since they were set up have been successful and I am not merely talking about making money but in laying the foundations of our energy policy in the years ahead. Their efforts in that regard have been good and useful. There is great potential for us in the use of natural gas but it requires to be used as widely as possible and with as much skill as possible.

I welcome also the development of the natural gas line between Cork and Dublin which I hope will be completed as soon as possible because delay in this area means loss of money. I should like also to see spurs or prongs built on to this line feeding the main cities and urban areas between Dublin and Cork. I am thinking particularly of Limerick. We had a commitment from the previous Minister, Deputy O'Leary, that a spur would be built from the Cork-Dublin line simultaneously with that line to Limerick. I hope the Minister will honour that pledge and have no delay in providing this Limerick spur. The plight of the Limerick gas company is urgent. The Minister, his officials and An Bord Gáis are well aware of the drastic need for financial help for the company to maintain their solvency and ensure that they are able to provide a gas service for the Limerick people.

The company face a very difficult task just now mainly due to the cost of naphtha on the world market. Naphtha is the product from which gas is made — I can see the Minister looking at me in a critical way — but naphtha is something that the multinationals also sell. It is the main product from which gas is made under the present system of gas manufacture when you have not natural gas available. The price of naphtha has continued to rise at an alarming rate in the last decade. Back when Mr. Justin Keating was Minister he tried to tackle the problem of the price of naphtha and one of his most trenchant critics was the then Deputy O'Malley who harried him continually in the House about being timid and pussyfooting with the multinationals and not being able to impose control on the price of naphtha. It was rather ironic that when the then Deputy Keating went out of office he was replaced by Deputy O'Malley. Perhaps Deputy O'Malley was not quite so stern then in tackling the multinationals. If one is to judge by the continuing spiral in the price he was no more successful — indeed less successful — than Deputy Keating was in regard to the price of naphtha. The price continued to rise.

We had other Ministers taking over from Deputy O'Malley, Deputy Colley being the first. I went to see him as a member of Limerick Gas Committee to ask him to help the gas company to remain viable and in business in Limerick and also to help to control the price of naphtha. While he was sympathetic and helpful and did subsidise the company he could not do much about the price of naphtha which continued to rise. Since then two other Ministers have stepped in and we went to see each of them in turn. Deputy M. O'Leary, the previous Minister, continued the aid but the price of naphtha has continued to rise. It is one of the fastest increasing prices in the world and as the gas company are totally dependent on this product for the manufacture of gas in Limerick they have no option but to pay the increased prices. The multinational oil companies concerned have a virtual monopoly in this area and one must pay whatever price they demand. Otherwise they will threaten to terminate the contract and people would be left without gas which would be a great tragedy in the case of Limerick where gas has been used for more than 100 years.

The position has now reached a crucial stage in that the money needed to subsidise the company and prop it up is increasing all the time. The continued strain not only on the company but on Limerick Corporation is a matter of serious concern. I had hoped that An Bord Gáis would have stepped in to reinforce the negotiating tactics of Limerick Corporation in tackling the multinationals. But they have not been successful either. The negotiation with the multinationals is one long tale of woe. I appeal to the Minister to do all he can to ensure that the company are kept in operation and also to speed up supplies of natural gas to Limerick. Unless this is done the consumers — and there are many thousands of them in Limerick — and also the workers — there are about 80 workers involved — are endangered because of the threatened closure of the Limerick Gas Company. I make a special appeal to the Minister to give priority to the gas company concerned and to ensure that they are maintained in viable operation.

Finally, I wish the Minister well in what he is about. He has been given a very responsible position at a crucial stage in our development. We have an increasing population and a developing, urbanised, industrialised society and his is a key Ministry. It is very important that he should discharge his duties in the best interests of our people because our energy policy is central in the whole economic expansion and development of our society. Unless that policy is right all other policies are bound to suffer. I hope the Minister will address himself to some of the points I have made especially in relation to the Limerick Gas Company and that he will endeavour to give that company special priority on the financial front by means of a subsidy to keep the company in existence and also use whatever powers he has to endeavour to stabilise the price of naphtha and ensure that the company can buy it at perhaps not a reduced price but at least at a stabilised price.

Mr. E. Collins

I welcome the Bill in principle and the progress which An Bord Gáis are making in bringing the gas line from Cork to Dublin. I accept in principle the financial package outlined in the Minister's speech. It is correct that we should have a balance between internal sourcing of finance and external sourcing. I hope that in the external sourcing there will be a guarantee by the Government regarding any devaluation of the punt so as not to expose the board to the effects of devaluation. This is not spelled out in the Bill but I think the Minister should assure the House that foreign borrowing would be guaranteed by the Government. I note from the Minister's speech that borrowing will be from the European Investment Bank and I hope the Minister will bring before the House the final terms of the loan negotiated and make clear that the board are protected against devaluation of the punt.

I should like to raise briefly — since time is against me — the question of bringing gas to provincial centres such as Dungarvan and Waterford. I understand that a technical report has been made by the Waterford Gas Company to the Minister and I would be grateful for his comments on it. The proximity of both Dungarvan and Waterford to the natural gas line must be considered and the depressed economic state of both Dungarvan and Waterford must be taken into account by the Minister. The supply of natural gas to vital industries such as Waterford Co-Op. and Waterford Gas Company would be of prime importance in reviving industry in Dungarvan and Waterford.

The question has been raised by the South Eastern Development Organisation with the Minister regarding a supply to Kilkenny, Clonmel and Wexford. I fully understand the need for a cost-benefit analysis. I accept that you can reach a periphery where a cost-benefit analysis will come down on the adverse side. Natural gas should only be supplied where it is more economic to do so and where the revenue accruing to the major users in the particular area is sufficient to make the product economically viable. I heard with interest Deputy Barry Desmond's comments on pricing policy and I agree with them. It is important that we have a market-related costing for natural gas. When I was in the Department I was particularly aware of the problems which Bord na Móna are facing getting a market-related price for their products.

Debate adjourned.