Dáil Éireann debate -
Tuesday, 13 Jul 1982

Vol. 337 No. 9

Gas (Amendment) Bill, 1982: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. J. Bruton

I shall not detain the Minister but I would like some information about the provision of capital by the State for bodies such as An Bord Gáis. The Devlin Report specifically recommended, and the recommendations were accepted by the then Government in 1969 and have remained accepted by all Governments since then, that all State agencies spending public funds should have clearly stated objectives divided into two categories: (1) those which were clearly economic and therefore should be implemented without any interference at all by the State and (2) companies whose goals or objectives were not solely economic but which had a social or other implication and, in respect of which the body should be the subject of more certain scrutiny by the Department concerned. I am anxious to know if An Bord Gáis, to which we are making available this additional sum, have objectives of this character which would conform with the recommendations on the Devlin Report and, secondly, if these objectives are clearly sub-divided as between those which are economic and, therefore, in the interests of efficient public sector enterprise carried out and without any interference by the Minister, except such as would be normal in the matter of private sector concerns in the same area, and other objectives in respect of which interference by him would be legitimate. Has he such a sub-division and would he indicate the precise objectives the board have and how they relate to this sub-division.

I would also like to know the method whereby An Bord Gáis propose to raise the money authorised by this legislation. As the Minister and the House will be aware from the replies given to questions put by Deputy L'Estrange today, there has been a very considerable growth in foreign borrowing by State companies. The growth has exceeded that of the State itself. If we are to know the overall vulnerability of the State in regard to changes — for instance, in the valuation of currencies — which would naturally increase the amount that would have to be repaid over and above the amount actually borrowed if the foreign currency in whose denomination we have borrowed money increases in value relative to ours, there should be a central system for monitoring foreign borrowing by State companies where such foreign borrowings are accompanied by a State guarantee.

In so far as borrowing will be undertaken by An Bord Gáis in pursuance of the powers vested in them by this Bill, will any direction or guidance be given to them either by the Minister for Industry and Energy or the Minister for Finance as to the extent, if any, to which An Bord Gáis may borrow abroad and as to the currencies in which they may borrow? Perhaps the Minister would state whether any arrangements will be made to carry or transfer to the Exchequer the responsibility for any exchange risk that may attend borrowings undertaken by An Bord Gáis. Will such exchange risks be carried entirely by An Bord Gáis or will the State have a share? If An Bord Gáis by borrowing foreign can do so with the benefit of an exchange risk guarantee from the Government, there is a very clear obligation on the Government to minimise the likelihood of such exchange risk guarantees having to be called upon by giving clear directions to An Bord Gáis as to borrowing policy. What arrangements will be made in regard to that matter?

I should be grateful if the Minister would inform us whether the report of An Bord Gáis, in so far as that document is obliged to give us a clear statement of the upcoming liabilities of that body, is in every particular in conformity with the recommendations of the Department of Finance in regard to format of State company reports and whether it is fully informative in regard to the liabilities undertaken by this company.

The Minister might also indicate the background to the announcement made by him regarding the bringing of natural gas to Dublin. I should like to know if the Minister made this announcement before the board of An Bord Gáis had deliberated on the technical feasibility of this matter. Is there any truth in the suggestion that the board had not completed their technical inquiries but were informed that the Minister had decided that natural gas would be brought to Dublin, thereby short-circuiting the value of appointing reputable people to the board? If their deliberations are to be pre-empted by ministerial decision there would appear to be little point in having a body such as An Bord Gáis. The Minister might comment on this.

I would also welcome an indication by the Minister of the likely life, given present commitments, of this gas find. It is important that we should know the length of time that this source of relatively inexpensive energy will be available. It would be unwise to encourage any very substantial capital investment to avail of a source of energy which would be of relatively short duration. Perhaps the Minister would give some information on this point.

Minister for Industry and Energy (Mr. Reynolds)

I thank Deputies who contributed to the debate. Some very interesting observations were made and it was only to be expected when dealing with the bringing of natural gas to Dublin and the first steps in the creation of a national grid that some Deputies raised the same questions. I will attempt to reply in as much detail as possible.

Most Deputies spoke about the pricing of gas and Deputy Barry advocated either that cheap gas should be given to the ESB and the benefits passed on to industry in the form of cheaper electricity charges or that gas should be supplied direct to industry as a cheap fuel. Deputy Barry Desmond favoured a full energy-related price, as did Deputy Eddie Collins. Deputy Desmond suggested that the increased surplus accruing to BGE from such a policy should go to the Exchequer and that a controlled aid open subsidisation of organisations such as the ESB and NET could be implemented where appropriate.

I believe that the ideal objective is to displace the largest volume of high cost oil, that is, gas oil, thereby maximising savings on costly oil imports. Because the premium markets, mainly cooking and heating, are relatively small at present, a large volume of gas will be available for the generation of electricity and for industrial use for the foreseeable future.

It should be borne in mind that the price of gas to the ESB has resulted already in substantial savings in fuel costs. Were it not for these savings ESB prices to the consumer would be 10 per cent higher. The most recent price increase to the ESB was 5 per cent, the lowest price increase for quite a long time. As a general approach, the price of gas to the ESB will be related to the heavy fuel oil price, with a justifiable reduction. The price of gas to industry will be on favourable terms to attract large industrial users of heavy fuel oil.

Deputies will be aware that a comprehensive study of all aspects of the NET operation is awaited by me. I will bear in mind Deputy Desmond's concern about subsidy when considering the report on that study. The price for NET gas was negotiated direct before BGE were formed.

Deputy Barry said that the policy was a pragmatic one and basically that is a fair description. Until the quantities for each segment of the market were identified and quantified it is fair to say that a pragmatic policy was being pursued but a more cohesive policy is now being undertaken. When we have identified the quantities required for the premium markets and for the ESB there will be a cohesive policy in regard to the use of natural gas in industry. I appreciate that new industries and industries planning for the alternative use of energy need to know their position and for what period they can be assured of supplies of natural gas.

On funding of capital projects and the applications of BGE's surplus, Deputy Barry sought clarification of the funding of the pipeline project. The position is that 70 per cent of the cost will be raised by borrowings. These will consist mainly of EIB loans but there will be some domestic borrowings also. The remaining 30 per cent will come from BGE's internal resources.

It may have been a little difficult to understand what I said on Second Stage. To clarify, 70 per cent is from borrowing and 30 per cent from internal reserves. Of the 70 per cent there will be some domestic borrowings also. I anticipate that this will set the pattern for future investment by BGE in capital projects. It is the intention that surpluses accruing to the board which are not required for capital expenditure will be transferred to the Exchequer.

On the question of State investment in gas companies raised by Deputy Barry, one of the main elements in the agreement between BGE and Dublin Gas is that the State will have an equity participation in the company and representation on the board. For its part the State, through BGE, will contribute most of the cost of the conversion to natural gas and a large proportion of the cost of the market development. The Deputy raised the interesting point as to whether I was lucky enough to be in the right place at the right time in relation to the advertisements by Dublin Gas that appeared. He asked me to confirm to the House that I have not had my finger in the pie for want of a better description, or any part whatsoever in that operation. I clearly and categorically state that I had absolutely nothing to do with the placing of those advertisements.

Mr. P. Barry

Excuse me. That is not what I said at all.

Mr. Reynolds

The Deputy said that I was extremely lucky to be around at the time of the by-election, that this announcement should be made.

Mr. P. Barry

The same point was made by Deputy Bruton and myself. I also referred to the fact that the advertisements appeared on the following night. I accept that the Minister had no part in the placing of the advertisements. The point made by Deputy Bruton and myself was that the announcement was made on the 9 o'clock news on the Friday night and the following morning the newspapers said that negotiations had been completed in the early hours of the morning.

Mr. Reynolds

With regard to finishing in the early hours of the morning, the Deputy may want to get into hours and minutes.

Mr. P. Barry

I would, yes.

An Leas-Cheann Comhairle

Deputies, we should be careful not to anticipate Committee Stage. There should be no interruptions while the Minister is concluding.

Mr. Reynolds

In relation to the Dublin Gas advertisements in the newspapers, these are a matter for the company. It is part of a marketing development strategy. How else would anyone reasonably expect the company to sell gas or advertise their wares? It is a common marketing strategy in business today.

Deputies will appreciate that the negotiated packet has yet to be presented to the stockholders in Dublin Gas for consideration. While there is no rigid policy of share participation in return for a supply of gas, circumstances may make this approach appropriate in other cases.

Deputy Sherlock raised the question of using natural gas for feedstock for the petrochemical industry. This has been examined, but there are no immediate prospects of use of natural gas for these purposes.

The Deputy also raised the question of employment on the project. At present, almost 500 people are employed. This number is expected to increase quite considerably as work on the project intensifies. In addition, many other jobs are being created as a result of sub-contracting to Irish manufacturers. As I said in my speech, the overall number of jobs arising from the project will be in the region of 700 to 800.

On the question of spur lines, off the main pipeline, referred to by Deputy Sherlock, I have already made it clear that the pipeline to Dublin is the main priority aimed at the Dublin market, which is the largest in the country. Second phase development will consider proposals for other towns, initially those with existing gas supplies, for a supply of natural gas. Supplies to industries and co-operatives within a convenient distance of a pipeline will also be examined. Now that the main project is well advanced, I have asked BGE to look immediately into these further developments. As I have already indicated, BGE have completed preliminary routing studies and possible spur lines to Limerick and Waterford. Studies on the feasibility of using natural gas have been submitted to my Department by Clonmel and Limerick Gas Companies and these are being examined. A preliminary study undertaken for Waterford Gas has also been lodged and I expect that report to be completed shortly.

Deputy Kemmy mentioned the serious plight of the Limerick Gas Company. In recognition of the financial difficulties being experienced by this company, in January last the Government implemented a package of measures to alleviate their problems. The package included low interest loans by means of the transfer of portion of the company's existing loans to the local loans fund and the taking over of certain of the company's debts. Limerick Gas also achieved significant savings through an arrangement for a supply of naphtha from the INPC. I agree with the Deputy that Limerick Gas has little future without an early lay-on of natural gas.

Regarding contracts between the State and Northern Ireland which were negotiated recently, Deputies referred to these negotiations for the supply of gas to Northern Ireland and suggested that the details be disclosed. The Deputies will appreciate that while agreement was reached on the main terms on which gas could be supplied, these remained to be approved by the two Governments concerned. In such circumstances, the House will appreciate that it would not be appropriate for me to reveal the terms at this time. However, when approval has been given by the respective Governments I see no reason why the terms should not be disclosed.

Deputy Barry referred to the supply of gas by pipeline to this country via Northern Ireland and Scotland. Our efforts are being directed at developing premium markets for Kinsale gas, to exploit fully our present gas resources. It would seem more practical to see connection to a United Kingdom gas grid as a long-term issue to be considered in detail when markets here have been developed and particularly if no further commercial discoveries of natural gas are made to supplement those off Kinsale Head.

I join with Deputy Barry in complimenting the IFA and ICMSA concerning their contribution to the success of the pipeline project, especially with regard to the acquisition of wayleaves. They helped the farming community, in particular, to have a greater understanding of the safety and benefits of the pipeline project. I was particularly struck by the Deputy's comment that agreements were abided by to the letter by the farmers where lands were affected. This was a display of civic spirit which is a credit to the two organisations and worthy of the highest praise from all. Through BGE, I have asked the contractors to cause as little inconvenience as possible to the farming community and to leave the lands as they found them, where that is at all possible. This is a clear demonstration by the two farming organisations of what can be done when civic spirit is to the forefront, especially in trying to get underway a major national project like this.

Deputy Bruton referred to the objectives of An Bord Gáis. These are laid down under Section 8 of the Gas Act of 1976. Those objectives are being adhered to. In relation to the life expectancy of the present gas find at Kinsale, it is certainly envisaged to go to the end of this century, if not somewhat beyond. That does not take into account the possibility of further gas finds. Statistically, we would be the odd State out if Kinsale were our only real gas find. This is unlikely to be in isolation. Where a major find such as Kinsale has been made, one can be cautiously optimistic that there will be more gas around.

Mr. J. Bruton

Is that an assumption which the Minister is using in his planning?

Mr. Reynolds

No, it is fair comment by the technical people concerned that it is most unlikely that this find would be in isolation and that there would be no further gas finds in time around the coast.

Mr. J. Bruton

Is that assumption being used as the basis for investment decisions?

Mr. Reynolds

No. One could not make investment decisions on that type of assumption. I am only commenting on the fact.

Mr. J. Bruton

The Minister would agree that it is relevant.

Mr. Reynolds

Possibly. If one wants to go into the whole investment programme of BGE which has been gone into in detail, as a former Minister for Finance the Deputy would know the input of the Department of Finance into all these financial arrangements. Arrangements must be worked out with the consent of the Department of Finance, so it is not a question of the Minister for Industry and Energy working off his own bat outside the ambit of the Department of Finance. That is not the way it works. The investment decisions of BGE have been fully investigated and the Department of Finance have been fully involved in them.

Mr. J. Bruton

I am not asking this question as a former Minister for Finance, but as a Deputy in this House.

Mr. Reynolds

On the question of the exchange note of guarantee, this is not being applied to borrowings abroad by An Bord Gáis.

Mr. P. Barry

In view of what the Minister said earlier——

An Leas-Cheann Comhairle

I am sorry, Deputies, I know that you are probing the Minister but the Chair is concerned that we would conduct the debate as required of us. Standing Orders provide for the Minister concluding without interruption, at the end of which a question may be asked. We then go on to Committee Stage and it will be possible to ask as many searching questions as the House wishes.

Mr. P. Barry

It is not for Committee Stage.

An Leas-Cheann Comhairle

If the question is not appropriate to Committee Stage I do not see how it could be appropriate now.

Mr. P. Barry

It arises out of something the Minister said.

An Leas-Cheann Comhairle

The Minister has concluded and it is customary for an opportunity to be given to ask questions.

Mr. P. Barry

In reply to the point I made about this Government or An Bord Gáis offering to fund the connection between Scotland and the North of Ireland, the Minister said he did not think it was appropriate at this stage because we intended to develop our own grid. He also said there was a substantial field off Kinsale. It is not a substantial one but quite a small one of 180,000,000 cubic feet a day for 20 years.

Mr. Reynolds

In our terms.

Mr. P. Barry

In our terms it is substantial but in international terms it is small. The assumption is that if a national grid is built for this one small field the Government must have something else in mind and that is either another find or an inter-connector. The Minister is building in the assumption of another find in his planning.

Mr. Reynolds

No. It is based on known reserves. All the investment plans and assumptions made are based on that only.

Mr. P. Barry

I have some doubt about the feasibility of the financial commitment involved.

Mr. Reynolds

It has been made on the basis of what I have said, not on the basis of any further finds. It is purely on what the known reserves are and what will give us a return.

Mr. P. Barry

Outside of the existing pipelines either under construction or completed spurs to Galway, Limerick, Waterford and the North?

Mr. Reynolds

Yes.

Mr. J. Bruton

The Minister did not reply to a question I asked about a reference in the Devlin report which suggested that the objectives of the company should be sub-divided as between economic/commercial objectives in which the board should be entirely free, and other objectives of a strategic/social character. Are the objectives, either privately or publicly in the Minister's Department, divided between those which are economic and those which are not just economic? If not, the Minister is not complying with the Devlin report.

Mr. Reynolds

They are mainly commercial in my area and the Deputy is well aware of that.

Mr. J. Bruton

If I was well aware of it I would not ask a question about it. I do not ask the Minister questions just to show how much I know but to try and get information which I do not have.

Mr. Reynolds

Clearly the Deputy must recognise that An Bord Gáis are in a different position from CIE where there is a social situation. The commercial objectives in relation to BGE have been set and will not be interfered with by the Minister except as laid down under section 8 of the 1976 Act.

Mr. J. Bruton

Are the objectives strictly economic and commercial as laid down in the Devlin report or are some of them ones which involve other considerations such as strategic considerations in addition to the strictly economic?

Mr. Reynolds

They are taken into consideration. The Deputy had a question down today and he got an answer.

Mr. J. Bruton

I did not get an answer.

Mr. Reynolds

I will give it to the Deputy. The functions at (a), (b) and (c) of the Deputy's question are taken into account in policy formulation and the working relationship between my Department and the State agencies under my aegis. As the Deputy will appreciate, the functions of the Department were substantially altered in the last year or so and certain consequential aspects have still to be settled. Implementation on a formalised basis of proposals referred to will be considered when circumstances permit. The Deputy is well aware that a section of industry was taken out of one Department and put into another. He is also fully aware, and I am sure appreciates, that to comply fully with Devlin at this point is not possible. We are going along those lines. A large section was taken out of one Department and put into another and this upset the formation of policy which was taking place to comply with the Devlin report which the Deputy was talking about.

Mr. J. Bruton

Did the Minister say I did not know what I was talking about?

Mr. Reynolds

No, I did not. The formulation of policy setting out the two criteria of objectives which the Deputy is talking about was pursued in the Department of Energy until such time as a large section of industry was taken from one Department and put into another. I am sure the Deputy appreciates the complications that were involved. When certain consequential matters arising out of the transfer have been ironed out we will proceed to formulate policy along the lines suggested by the Deputy which are contained in the Devlin report.

Mr. J. Bruton

I am glad to hear that. Would the Minister agree that it is not very desirable but is a sad commentary on all involved — I include the former Government in this — to cite transfer of functions as an excuse for not taking decisions? We, as politicians, would be better off leaving things alone if changing Departments around is a means of avoiding making decisions.

Mr. Reynolds

I go along with the Deputy's views. I do not accept that that should be used as an excuse. However, the fact is that it has happened and we have to make do with it. Decisions are vital in the area of policy formulation, which the Deputy says, and I agree wholeheartedly with him.

Question put and agreed to.

Agreed to take remaining stages today.