I move:
That a sum not exceeding £10,056,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1984 for the salaries and expenses of the Office of the Minister for Energy including certain services administered by that Office, and for payment of certain loans, subsidies, grants and grants-in-aid.
Although this is my first time to present an Estimate for the Department of Energy, I have already been able to indicate to the House, when I availed of the opportunity given to me by an Adjournment debate last December, those aspects of energy resources policy which I believe to be particularly significant. I welcome this further opportunity of going into more detail in describing the role which I see for my Department, and of hearing the views of Deputies in the matter.
Despite the fact that the Estimate for my Department is quite small, my Department's role in the public sector is one of considerable extent. In addition to the activities for which my Department exercise direct responsibility for expenditure from the Vote, I am answerable for the plans and overall operations of the four very important State agencies in the energy area — the ESB, Bord na Móna, Bord Gáis Éireann and the Irish National Petroleum Corporation. I will, therefore, advert in my speech to the work of these agencies so as to give Deputies an opportunity to discuss all aspects of energy policy.
Before dealing with the expenditure requirements of my Department I am glad to be able to say that my Department are making an increasing and, by now, very significant contribution to the revenues of the State. Over the years determined efforts have been made to use our natural resources for the benefit of the whole community. The utilisation of our natural gas is now contributing substantial amounts of revenue. This contribution however is not reflected in the Estimate before you, as it is presented in the traditional form. Some £54 million will be remitted by BGE direct to the Exchequer on foot of receipts for natural gas and BGE will also fund from its own resources an estimated 30 per cent of projected capital expenditure on the gas transmission network, a further £5 million. It is expected that Marathon will pay about £5.6 million in royalties to the Exchequer in 1984. I would also like to draw attention to the fact that availability of natural gas to the ESB has reduced the fuel bill of that organisation by the order of £100 million, as against the position where no natural gas was available. We have, of course, to offset against this capital charges associated with the provision of gas burning plant. In its continuing licensing activities, my Department have secured interests for the State in exploration consortia which have been estimated to be worth of the order of £4.5 million.
I will now begin with some general observations on the Estimate itself. Deputies will note that the Estimate for this year is just over £10 million and shows an increase in net expenditure of approximately £1.2 million over the outturn for 1983. The increase in gross expenditure is much the same since the estimated total receipts from Appropriations in Aid for 1984 show very little change from the 1983 outturn. There is increased expenditure in ten subheads totalling £2,791,000 offset by reductions totalling £1,542,000 in other subheads. Most of the increased expenditure arises from subhead P. — FEOGA — Western Aid Electrification — on which an estimated £1,870,000 will be spent from the Vote. This is a capital service. The largest reductions in expenditure are in Subhead L — State Support for Mining Operations (£521,000) and J — Town Gas Subsidy (£390,000). About a quarter of the gross expenditure is provided for capital services. As well as FEOGA, £1 million has been provided for private bog development (Subhead M) and £97,000 for investigation of new and renewable sources of energy (Subhead N).
Following the two oil shocks of the seventies, all Governments and the public came to realise the economic and security implications of energy supplies. This has now become a major issue for domestic policy and international collaboration through agencies such as the EEC and the IEA (International Energy Agency). The major objectives of most energy policies are to reduce excessive dependence on oil and other imported energy, to improve security of supply, to diversify fuel sources, to improve efficiency in utilising energy and to reduce its cost to consumers. Success in achieving these objectives takes a considerable number of years and, in some cases, requires heavy investment. A major effort has been made in Ireland and I am glad to report that our progress has been recognised in, for example, a recent review of energy policies carried out by the EEC Commission. While much remains to be done we can say that our energy structure is today a great deal more secure and diversified than it was some four or five years ago.
There has been a significant transformation of our energy utilisation including the flexibility to use different fuels, and undesirable trends have been reversed. Up to 1979 energy consumption had been growing rapidly at a rate of 6-7 per cent per year based entirely on imported oil. In that year — 1979 — we imported 80 per cent of our energy, and oil made up over 70 per cent of the total. A policy of utilising our own resources of natural gas and peat and increased efficiency in utilising energy has changed this. The growth in energy consumption has been stopped and it is now falling slowly. Domestic production of energy has almost doubled and imports have fallen correspondingly so that today about 40 per cent of our requirements are now produced at home. A more dramatic change has occurred in oil consumption which has fallen by one-third over the past four years and now supplied just under half of our total usage.
This improvement in our vulnerability has not been achieved without cost. The production of energy and its diversification calls for heavy investment. The capital investment programmes of Bord na Móna and the ESB have been particularly large and are now approaching completion. Substantial investment in natural gas distribution has also occurred and will continue for some years to come in order to exploit the market for gas in our towns, cities and industries. I will now deal with the major State agencies in the energy sector.
The Electricity Supply Board's capital expenditure for 1984 will be of the order of £249 million. Since the two oil crises of the 1970s, the thrust of the ESB's generation strategy has been to diversify away from imported oil as a fuel source and make maximum use of native fuel resources.
The most significant change in the ESB's fuel mix in the past five years has been the replacement of oil by gas for a substantial amount of its electricity generation. As recently as 1979, nearly three-quarters of our electricity was generated from oil. Natural gas had just become available. Today, oil-generated electricity is down to its lowest level of just over 20 per cent and gas-generated electricity is now more than 50 per cent of the total. This dramatic change was achieved through investment in new plant at Aghada, County Cork, and North Wall in Dublin, and conversion to gas burning of existing oil-fired plant at Marina, County Cork, and Poolbeg in Dublin.
This investment of about £100 million has already brought significant benefits, both nationally and to the ESB customer as compared with continued reliance on oil. At end March, 1984, it had saved the ESB customer about £262 million compared with oil generation and it had reduced the balance of payments by £355 million through the replacement of expensive imported oil by indigenous natural gas. In addition, Bord Gáis Éireann had been able to contribute £109 million to the Exchequer, largely from sales to the ESB.
This rate of gas usage could not be continued indefinitely and, timed to coincide with the phasing out of natural gas, the ESB are planning to commission a coal-fired generating plant at Moneypoint in County Clare. This is scheduled to come on stream in three phases in 1985, 1986 and 1987. With the plant fully operational the position will be that, by the end of this decade, the ESB should be producing 50 per cent of all electricity from coal, a further quarter or so would be provided by hydro and milled peat and the remaining quarter would be provided either from gas depending on future availabilities, imported oil, or further development such as conversion of existing oil or gas-fired plant to coal burning. This will mean that we will be largely dependent, in the long term, on imported fuel for electricity generation. It is essential, therefore, that we should diversity our fuel sources for electricity generation to the greatest degree possible in order to ensure security of supply and access to the most economic fuels available.
One further point in relation to the Moneypoint coal-fired project is that, as Deputies will be aware, completion of the third phase has been reviewed in my Department in the light of reduced demand for electricity, the board's present over-capacity and the need, in present circumstances, to re-evaluate all capital projects. I have given the fullest consideration to the out come of this review and have brought my conclusion to the Government. I am glad to be able to inform the House that the 3rd phase of the Moneypoint project will now be completed.
The ESB's capital expenditure on construction projects, that is new generating plant, will amount to £153.6 million in 1984. £146 million of this sum will be spent on work at the Moneypoint site. The balance of £7.6 million relates to residual expenditure, on recently commissioned extensions to the peat-fired stations at Lanesboro and Shannonbridge, the new gas fired combustion turbines at North Wall in Dublin and the conversion of Poolbeg to gas firing. Combustion turbines have played an important role in allowing the ESB to switch quickly to using natural gas. Their flexibility derives from the relatively short lead-times required. Other types of generating plant require lead-times in the region of seven or eight years, as opposed to three years for combustion turbines. This shorter lead-time enables early adjustments to be made in the generation plant programme to cater for variations in electricity demand, for whatever reasons such variations might arise.
The expenditure figures involved are, of course, very large and it is appropriate at this point to mention that, in all its activities, the ESB does its utmost to avail of Irish industrial and commercial resources. It is firm ESB policy to promote and support Irish industry as much as possible. ESB assistance to Irish firms has taken the form of technical support, including product design help in the early stages of production. Generating station construction contracts are sub-divided to facilitate Irish firms and the success of this approach is indicated by the fact that at the Aghada station 60 per cent of the total investment was channelled directly into the Irish economy. The corresponding figure for stations built in the fifties was 10 per cent. The board have assured me that they will continue to do their utmost to avail of the services of Irish industry.
The board's expenditure on premises and general equipment is expected to amount to £8.6 million in 1984. This includes £4.35 million for completion of the new head office complex in Dublin which will incorporate the new national control centre. Other items of expenditure include computers, office furniture and tools. When the head office complex is completed the ESB will not be embarking on any further head office or district headquarters developments until after 1990 while other premises developments will be limited to absolute priority cases.
There will also be substantial expenditure by the board on transmission and distribution projects. These will account for expenditure of about £89.5 million in 1984 with expenditure on transmission projects alone amounting to approximately £30 million. This amount includes £21.5 million for the Moneypoint to the east transmission lines and £8.5 million on the maintenance of standards on the existing transmission system. In addition, there will be expenditure of £2.5 million on the board's new national control centre which is expected to achieve efficiency savings of up to £2.5 million per annum in their fuel bill. Expenditure on distribution projects will come to about £51.33 million in 1984. This expenditure is required so as to maintain an acceptable level of service to existing customers and to strengthen electricity distribution networks for the connection of new customers. The activity is essential and has a high employment content.
A development of significant importance during the past year was the ESB Strategic Plan 1983 — 1988. The plan, which has as its primary objective "to make major changes to achieve substantial price improvement", was drawn up by the board and management of the ESB on their own initiative and responsibility. The plan has already been the subject of debate and question in this House, principally because of its far-reaching implications for future energy policy. Members of the House are aware of the Government's decision on the peat generation aspects of this plan; I feel sure that the House accepts that the future of Bord na Móna has been sensitively cared for and that full consideration has been given to the social, strategic and regional implications of the proposals — as well as the economic aspects. The ESB carries responsibility for the other proposals of the plan under its statutory obligations.
Another development in the provision of electricity has been the western package electrification scheme. Expenditure of £1.87 million and receipts of £.936 million are provided for this scheme in the Vote. The scheme is part of an EEC funded package of measures designed to alleviate the special problems of agriculture throughout the west of Ireland. As well as the electrification element of the package, aid is also provided for the development of water supplies, roads, land improvement, forestry and training services in the agricultural community. The counties to benefit include Donegal, Leitrim, Sligo, Mayo, Galway, Monaghan, Longford, Cavan, Roscommon, Clare, Kerry and parts of west Cork and west Limerick. The aim of the western package electrification scheme is to improve the viability and competitiveness of farms through the extension and improvement of electricity supplies to farms throughout the region. Thirteen million pounds in aid is being jointly provided by the State and the EEC over a ten year period. Aid is available towards the provision of electricity to farms previously unsupplied, increased and three-phase supplies to farms requiring additional power for their agricultural needs and also aid to a number of marketing and processing plants involved in the agricultural sector. Finally, aid is provided for the improvement of the networks thoughout the region.
Eligibility is in accordance with EEC Regulation 1820/80. Those who qualify for aid must be principally dependent on agriculture for their income. The State and the EEC each contribute 40 per cent of the cost of connection, the remaining 20 per cent being borne by the beneficiaries. To date, 2,735 applications have been approved under the scheme at a total cost of £5,607,828 and it is anticipated that a further 1,434 farms will benefit under the scheme in 1984.
In May of last year, the Government announced the setting up of an inquiry into electricity prices which would identify and analyse the reasons for our high electricity prices and make recommendations to achieve lower prices. The membership of the group includes representatives from industry and Government Departments and is under the chairmanship of the former chief executive of the Danish electricity utility, Elsam.
The inquiry commenced in September 1983, and is expected to complete its final report for the Government towards the end of this month. It has already furnished an interim report to my predecessor.
Provision has been made for the sum of £75,000 in my Department's Estimate in respect of the price inquiry. This sum is being provided to cover expenditure on fees and expenses for the members of the group and, principally, on expert back-up services for the Inquiry.
In regard to turf development, for almost 40 years Bord na Móna has been at the centre of energy policy in this country in our efforts to develop and utilise our own energy resources. Today, Bord na Móna contributes approximately 15 per cent of our national energy needs, has developed considerable expertise in exploiting this traditional native fuel and is at present pursuing a vigorous policy of expansion. At the end of the 1982-83 production year turf accounted for 866,000 tonnes oil equivalent in our national energy bill and will expand to 1.1 million tonnes oil equivalent when the present development plans are in full production. The overall Bord na Móna capital estimate for 1984 was originally for £37 million which was mainly for the continuation of bog development work under the board's third development programme. Significant provisions include £5.5 million for railways, £4.8 million for machines, £4.2 million for drainage and £1.6 million for buildings.
Included in the total estimate of £37 million was a provision for £15.4 million for the Ballyforan briquette factory. Early in 1983, the board had it indicated to them by the then Minister for Industry and Energy that it should undertake a full review of the Ballyforan-Derryfadda briquette factory and bog development project. Several factors combined indicated the need for this review; the costs of the project had significantly increased from the time of earlier approval; the price of oil had eased, the solid fuel market was seen as noticeably more competitive at a time when the board itself was implementing in phases, the Government approved price increases for turf and for briquettes. The price for milled peat to the ESB had been increased. By mid-1983 it became evident that greater attention needed to be given to the marketing projections.
The result of this review led the board to conclude that it would not be prudent for it to continue with the project and, accordingly it took the decision in May 1984 to defer the project for one year. The board, by way of comment, also added to its decision that if the Government were to make moneys available, development work could still continue on the bog, thereby saving the jobs of approximately 156 people. The board itself is continuing this development work for this current season but could not see it possible to carry on this work for longer than approximately one year unless restart of the project as a whole were foreseen. The total expenditure now envisaged on the Ballyforan project for 1984 is £4.6 million rather than the £15.4 million originally estimated for. That entire position is to be further considered in meetings between the board and the Department. Full assessment of the position is being made. Some minor impact on Bord na Móna will result from the ESB strategic plan.
In 1984, production will consist of just over half a million tonnes of sod peat, four and a half million tonnes of milled peat and about a half a million tonnes of briquettes. Production of moss peat will rise from 1.3 million cu. metres in 1983 to 1.4 million cu. metres in 1984. Much of the additional milled peat will be used for electricity generation which would otherwise have to be generated by oil. The remainder will be used for the production of briquettes in the Littleton factory which, it is anticipated, will come into full production in 1984-85.
The Private Bog Development Scheme came into effect in June 1981. The scheme is administered by Bord na Móna and is funded by an allocation from the Department's Vote. It provides for payment of grants to individuals, qualified groups or societies towards the cost of private development for the production of turf for fuel. Bog development comprises the cost of access roads, drainage and the cost of purchasing, hiring or leasing equipment to carry out the development work. Grants payable may not exceed 60 per cent of the cost in the case of qualified groups or societies and 45 per cent in the case of individuals. The scheme was introduced to increase the volume of indigenous energy being produced, that is, mainly sod peat. It is an effort to bring dormant resources, that is, a very large number of smaller bog areas which would not be of interest to Bord na Móna, into turf production. The scheme has had a wide welcome and to date, £2.4 million in grant aid has been approved in respect of the development of some 25,000 acres of bog under this scheme. I intend to review the scheme at the end of this season.
Of all the types of fuel in use in the modern world today oil is probably the most important and certainly the most versatile. Deputy Eddie Collins, the Minister of State at my Department, dealt with a number of issues relating to oil supply when addressing the House on the 1983 Estimates last June. I consider that further comment is now warranted on these issues.
The first such issue is that of Whitegate Refinery. The refinery has been in operation in State ownership since September 1982, a period of just 20 months. Over much of that period it has been the focus of much critical comment, not all of which could be considered to have been well-informed, in relation to its efficiency and the economics of its operation in terms of the disparity between petroleum product prices ex-Whitegate and the prices of alternatively sourced supplies into the Irish market. The refining industry worldwide made huge losses but integrated companies strove to recoup these losses in the downstream market. In its first six months of operation there was a market disparity between Whitegate product prices and import/transfer prices, that is, the prices at which the oil companies import 65 per cent of their product requirements. Improvement in crude contract supplies, judicious spot purchases and operational efficiencies have resulted in a marked improvement.
Most of the bad comparisons were made on an assumption of 100 per cent spot product the price of which was then particularly low but no company and no country could depend to any appreciable extent on such sources. The current magnitude of the "diseconomy" and the improvement in economics over the past year were contributory factors to the reaffirmation of the Government's commitment to the continuance of operations at Whitegate as expressed in a Government decision of 31 January last. Oil prices in current world circumstances and the relationships between spot and official prices will of their very nature remain volatile. It is not possible to assure anyone that further changes in prices ex-Whitegate may not occur, whether downwards or upwards.
Deputies will be aware that the mandatory off-take regime, which the Government were left with no option but to introduce and to defend, successfully, in several injunction proceedings, in order to ensure disposal of Whitegate's production, and thereby secure the continuation of refining there, is the subject of a legal challenge by a grouping of the smaller oil companies which is being contested by the Government. This challenge was initiated in the High Court, which referred certain questions in the matter relating to particular provisions of the Treaty of Rome to the European Court for ruling.
I mentioned some moments ago that the Government were left with no option but to ensure the disposal of Whitegate production by a mandatory, statute-based system. This is not and has never been the preferred approach. Just as in 1982, the preferred option of Government remains the disposal of Whitegate production by means of voluntary off-take arrangements entered into by the oil companies marketing in Ireland. The oil companies themselves had difficulty with or were not amenable to formulating such arrangements in conjunction with Government in 1982 but I would hope that a number of developments since then will make progress possible. In this connection I entered into negotiations with the oil companies with a view to reaching agreement on such suitable arrangements for disposal of the refinery's output as would enable the Government to phase out or dismantle the current mandatory provision. It is my hope that if the industry approach the discussions with a willingness to be constructive then significant progress can be achieved. I can, for my part, assure the industry that the Government are committed to a constructive approach to this dialogue.
One area of oil supply which continues to be the cause of concern is that of oil stock levels within the jurisdiction. Current events in the Persian Gulf, while not an immediate cause for concern, show the continuing uncertainty about disruption of oil supplies. There continue to be less than 65 days of stocks actually held on Irish soil and this constitutes an inadequate level in the event of supply difficulties. I am following up with the oil companies the question of raising stocks on Irish soil with minimum delay to an acceptable level.
I have had a further discussion with Gulf Oil in regard to the Whiddy terminal and await further response from them. I am concerned to protect the State's rights as regards storage and also as regards restoration of or compensation in lieu of the damaged condition of property on the leasehold.
Overall, therefore, there has been, in the past year, relative price and supply stability on the international oil market. Although one can never predict with any degree of certainty future events insofar as oil is concerned, it is to be hoped that this stability will continue and that this will allow us to build further on the progress made. The unstable and threatening situation in part of the Middle East indicates clearly that the need for care and the utmost prudence on security of supply is as great as ever.
The development and transmission of our natural gas resource is the responsibility of Bord Gáis Éireann. The Government's policy is to broaden the use of our existing natural gas reserves, to underpin the security of essential energy supplies and to maximise the net return to the economy and to the Exchequer from gas revenues. The successful completion of the Cork-Dublin pipeline marks the first stage of the Government's strategy for natural gas development. This will be followed by the provision of supply to town gas companies capable of disturbing natural gas safely and efficiently, when a supply can be provided on an economic basis. Deputies will be aware that a major agreement was reached last year with the Dublin Gas Company on the distribution of natural gas in Dublin. The conversion, development and marketing programmes are all major undertakings designed to maximise and expand the use of natural gas as a competitive premium fuel. The State's investment in this project is largely by way of rebates off the price of gas to the company. Some of the State investment is in the form of interest bearing loans. All going as planned, it is estimated that revenues in the region of £740 million in today's money will accrue to the Exchequer over the life of the project. From the time my predecessor took office the draft supply agreement with Dublin Gas was the subject of in-depth review. The company itself has very considerable work to do on its cost estimates and had a real need to deepen its conversion survey in order to copperfasten the cost estimates. While the company and its banking advisers were involved in aspects of the review essential for their own reasons, my Department very fully re-examined several aspects of the scheme and this resulted in major improvements which could be summarised as an increase from 50 per cent to 56 per cent of the profits, provision for the appointment of four directors, including the chairman for the initial period by the Minister to the board of Dublin Gas and, above all, a major improvement in that, allowing the need to pay off the bank debt and to repay State loans, the company would be subjected to a control on its margins so that its buy-in price would rise whenever the selling prices of the company afforded profit margins higher than a level which is defined in the supply agreement. After the bank and State debt envisaged in the financial parameters on which the whole project is based are repaid, normal price control applies. These measures have significantly tightened control by the State over a company into which State finance in the first and front line of exposure has been invested. In addition to that, once the agreed capital expenditures are repaid, there is adequate provision against excess profits.
Policy in the area of further extensions to the grid is not yet finalised. I am currently reviewing organisational and financial aspects of gas distribution generally and the role of Bord Gáis Éireann. It is my intention that there will be a major public sector involvement in the distribution process. Such a policy has to fit appropriately into an overall national policy for the utilisation of the Kinsale Field, the positioning and pricing of natural gas in relation to alternative fuels, and the commercial and cost factors involved.
With regard to particular utilities I hope to announce a decision on a supply to Clonmel shortly. Limerick has already made progress in preparing a project. Waterford and Kilkenny have also made some progress in this regard. The extension of supply to other population centres which do not have an existing town gas system will be considered at a later stage as well as supplies to industries. I must emphasise that the critical factor is a viable gas utility project, equitable for the seller, BGE and the buyer without excess dependence on State support and without exposure to excess transfer of the benefit away from the State and the consumer.
BGE will be surrendering £54 million of its profits in 1984 for the benefit of the Exchequer. The board's capital programme for 1984 amounts to £16.9 million, 30 per cent of which will be funded from their own revenue and the remainder from borrowings. The project to extend the Cork-Dublin natural gas pipeline to Northern Ireland will account for a major proportion of this money. The construction of the first stage of this pipeline, which will also act as part of the Dublin Gas network, is scheduled for completion by autumn of this year. Contractors have been appointed and the engineering design work is completed.
A provision has also been made in the Estimate for preliminary expenditure on Stage 2 of the project which will bring the gas from North Dublin to the Border and for some work in connection with extension of the grid to provincial centres.
It is a matter of some concern, then, that problems have very recently been raised by the British side relating to the arrangements agreed last October for the sale of Kinsale gas to Northern Ireland.
The memorandum of understanding approved and signed on behalf of both Governments contained all the key elements of the proposed contract — quantities, price escalation and currency provisions and a contract incorporating these provisions has been concluded and initialled by BGE and NIGAS.
The memorandum of understanding was entered into by both Governments with the express intention that the understanding would be fully implemented and work is proceeding on an agreed basis since last October. Negotiations for EEC aid are well advanced. In view of these facts the Government are looking forward to an early implementation of the agreed arrangements.
I now turn to the very important area of offshore exploration. In Irish offshore exploration attention generally continues to be focussed mainly on the Celtic Sea area following the 1983 Gulf discovery on block 49/9, and appraisal work in connection with that find is proceeding. Even though the first appraisal well related to the discovery was disappointing, the hydrocarbon flows achieved in the discovery well which is, after all, located in shallow waters and only 25 miles from shore are very encouraging. Needless to say, no decision can yet be taken on whether or not the find is commercial but I will be pressing for an appropriate appraisal programme. As regards this year's exploration programme BP have recently completed the drilling of a well in the Porcupine and Gulf are currently drilling a well in the Celtic Sea. Occidental will shortly drill in the Fastnet Basin and, later on, Gulf and Conoco will drill exploration wells in the Celtic Sea. All of this is apart from any further appraisal work related to the Block 49/9 find. There are possibilities that other wells will also be drilled.
Following the Gulf discovery, many exploration companies throughout the world expressed interest in acquiring acreage in the Celtic Sea. With this in mind I decided to initiate a new round of offshore licensing on 29 February this year. A total of 76 blocks, predominantly centred on the Celtic Sea but including a smaller number off our east coast, are being offered for licensing under the round. As I indicated when I announced this licensing round, arrangements were made by my Department in anticipation of the round to have very extensive seismic surveys undertaken over the blocks which are included in the third round. These surveys utilise the very latest seismic techniques and, hopefully, will produce data for the industry of a much higher technical quality than the older, previously available seismic data. In addition, the Celtic Sea Report, which was produced by my Department and comprises a comprehensive examination of the geology, geophysics and geochemistry of the Celtic Sea, is again available for purchase by the oil industry. The closing date for the round has been fixed for 15 February 1985. I believe that this will give companies sufficient time for evaluation of the available data and the blocks on offer.
I look on this third licensing round as a major step in promoting our ongoing policy of securing the thorough and expeditious exploration of our Continental Shelf. While oil exploration is a high risk business for the oil companies exploring offshore Ireland, nevertheless we must do all we can to ensure that as much exploration drilling as possible is undertaken. Every well drilled improves the chances of discovering commercial reserves. Even dry wells provide a great deal of information on the petroleum geology of our offshore basins. I, therefore, hope and expect that in the wake of the 1983 oil find, this third round will lead to a greatly increased level of exploration activity, particularly from 1985 onwards.
In the Irish offshore to date a total of 79 exploratory wells have been drilled — 32 in the Marathon-Esso leased areas and 47 under exclusive licences issued under the 1975 licensing terms. Arising from this, we have at present only one producing field—The Kinsale Head Gas Field. While no commercial discoveries of oil have yet been declared, we have had, nontheless, some significant flows and shows in a number of our offshore basins.
In the context of its extent I believe that our offshore is under-explored. While our designated areas extend almost all around our coastline and far into the Atlantic, only 79 exploratory wells have so far been drilled. We must, therefore, continue to promote and encourage exploration in our offshore. Every oil company will assess carefully and closely the relative advantages which it perceives in electing to undertake exploration in one region as opposed to another and we have been singularly successful in attracting the most respectable oil companies in the world to engage in exploration offshore Ireland.
One of the most important factors to be taken into account is the anticipated level of State take. The degree of flexibility built into our licensing terms gives assurance to the companies in this respect. The levels of royalty and State participation set out in the terms are maximum ones, and it is open to me to settle for lower levels where this is necessary to ensure a reasonable return on investment, so that production can go ahead. Our aim, like that of the oil companies, is to secure the discovery and commercial production of hydrocarbons. The overall objective of the 1975 terms, in short, is to provide from a commercial development the maximum benefits for the Irish people, while ensuring a fair return for the developers.
The House will be aware that the 1975 terms to which I have referred do not apply to a certain part of our committed offshore area — that part which is held under lease by Marathon, either alone or in conjunction with others. The provisions of an agreement entered into in 1959 apply to these leasehold areas. This agreement contains provisions which in current terms are exceptionally favourable to the licence holder. In particular, they provide an extended period through which the company could hold petroleum leases without pursuing an active exploration programme beyond that set out in the agreement and also it provides a framework which sets limits to the sum of royalty and tax payments.
The agreement provides that in certain circumstances certain payments might fall to be made to the leaseholder under the provisions of the agreement. These provisions may have to be acted upon in the next few years. The level of activity by Marathon-ESSO in the area exclusively leased to them is extremely disappointing to me. The acreage, which is considered to be of good potential, is under-explored. I will be looking for a significantly accelerated exploration programme in the Marathon-ESSO acreage.
Because of my concerns with the third licensing round I have concentrated on the Celtic Sea area so far. However, other basins in our offshore should not be ignored, particularly as there have been significant shows and flows of oil and gas in those basins. Our "open door" policy continues to apply to blocks which are not included in our third round and which are not already committed.
Mainly because of soft oil markets, many oil companies have temporarily shelved plans to explore the more expensive deep-water areas throughout the world. However, BP drilled a well in the Porcupine Basin this year, their fifth well in the discovery block 26/28. Unfortunately, no significant shows of hydrocarbons were encountered. BP will now evaluate the geological and other information obtained from this well, in conjunction with previous data, to enable them to decide on their future plans. Because we believe this basin has considerable potential, my Department are currently working to produce a report dealing with the Porcupine Basin similar to that produced for the Celtic Sea. Constraints on staffing, however, have delayed that work. On shore exploration is continuing in the North West Carboniferous Basin where non-commercial quantities of gas were discovered in 1962-63. The present licencees have carried out extensive geological field-mapping and seismic surveys and in April started drilling the first of two wells to be drilled this year. This first well has been completed and has been temporarily abandoned having encountered some background gas shows at some levels. The second will start very soon and we await its result with great interest.
In a period of plentiful fuel supply there may, on the face of it, appear to be less need for expenditure on energy conservation. However, I feel that this would be a very shortsighted policy and a sum of £400,000 is being provided in my Department's Estimate this year for the promotion of energy conservation.
The domestic sector was well catered for in the past with publicity campaigns and the attic insulation grant scheme. We have continued our concentration more on the industrial and public sectors. This does not mean that the domestic sector has achieved its potential or that the public do not need reminding of the benefits of taking energy-saving actions. The Department's "Hotline" is available for advice on any energy conservation queries and I would urge people to take advantage of this expert service. I would hope to consider having further publicity campaigns when funds allow this.
Meanwhile, my Department's programme for the industrial and public sectors, has been, with the help of the IIRS, coming up with worthwhile results. Since 1979 total energy consumption fell by 7 per cent while there has been some growth in the economy. This is a reversal of the previous trend of a strong connection between growth in energy consumption and growth in economic activity. While other factors, including prices, have undoubtedly had an impact on consumption, conservation and increased efficiency in using energy were major factors and can be expected to continue contributing to lower demand in future.
My Department, with the help of the NBST, have encouraged the widest participation by Irish applicants in the EEC Scheme of Aid for Energy Demonstration Projects for 1984 following on our success last year in achieving contracts involving aid of IR£2.4 million.
An initial assessment of my Department's steam plant audit service has shown potential savings of IR£3.6 million per annum and a further assessment will be carried out towards the end of this year. No matter what way Ireland's energy scene changes in coming years, the need for vigilance in getting the best value out of that energy will not change and so, I will continue to encourage energy conservation for all our sakes.
As in the case of energy conservation a short-term judgment based on present conditions might suggest that expenditure on the investigation of new and renewable sources of energy was not really necessary. Nevertheless, I suggest that a long-term view should be taken and my Department's Estimate for 1984 contains a provision of £97,000 for this activity. This sum will be used to continue the existing policy of assessing the potential for use of natural energy sources, demonstrating well-developed technology in action and supporting research to a small degree.
During 1984, studies of the size of wind, hydro and geothermal resources will be complete. It is hoped that reports will be available to the public by the late summer.
This year will also see the commencement of an EEC contract, under which the EEC will contribute to the cost of monitoring, maintaining and, where necessary, modifying five of my Department's wind machines.
The Nuclear Energy Board which has a very small complement of staff has some very important statutory responsibilities designated to it by the Government. These responsibilities involve such actions as regulating the import-export, transport, use, distribution and disposal of radioactive substances and irradiating apparatus. The licensing involves some 200 licensees covering medical, industrial, research and teaching areas within the country. The board carry out inspections on the licensees to ensure that the conditions of the licences are fulfilled. The Nuclear Energy Board are responsible for the National Radiation Monitoring Service, N.R.M.S.. The main service provided by the NRMS is the assessment of doses to people involved in radiation work. The service processed and reported on 64,000 personal doses badges during 1983 which represented the monitoring of over 2,500 individuals. The Nuclear Energy Board also advise the Department of Health through the board's Radiation Advisory Committee on matters connected with radiation safety, for example in the design of Beaumont, Tallaght, and other new hospitals planned.
The board carry out a programme of monitoring to check the levels of radioactivity in the environment and, in particular, in the Irish Sea. I have placed the board's latest report on the Irish Sea in the Dáil Library. The Irish Sea Programme involves the monitoring of radioactivity levels in fish samples, seawater, seaweeds and sediments. Other environmental monitoring deals with measurements of radioactivity in drinking water, food, rainfall and in the atmosphere.
My Department, through the Nuclear Energy Board, are kept in touch with important international research and development work in radiological protection and nuclear technology. The Nuclear Energy Board participate in working committees of the EEC, the Nuclear Energy Agency of the Organisation for Economic Co-operation and Development and the International Atomic Energy Agency, where discussions take place on the disposal of radioactive waste and the elimination of discharges and dumping of radioactive materials in the sea, which are matters of particular concern to Ireland.
I now turn to minerals exploration. There has been a significant drop in the level of minerals exploration activity in Ireland. This is not unexpected, given the poor metal prices which have prevailed for some years and the worldwide economic recession. Nonetheless, the level of investment still being maintained by a number of companies confirms the longstanding confidence of the minerals industry that further commercial base metal orebodies remain to be found in Ireland.
An improvement in some metal prices during the past year and the modest improvement being recorded in the world economy now gives some cause for optimism although any upward trend will take some time to work its way through to substantial new investment in minerals exploration.
My Department keep in close contact with the representative bodies of the industry and there are ongoing discussions on ways of stimulating interest and investment in minerals exploration. Following consultation with the industry I introduced, in September 1983, an open-file system for minerals licence data on file in the Geological Survey of Ireland. Up to that time, even though a prospecting licence was surrendered, data resulting from operations under it were treated as confidential.
I am aware that concern has been expressed, over the years, by some members of the industry about the absence of pre-determined mining lease terms. The argument put forward is that the absence of such terms makes investment by international mining companies in minerals exploration in Ireland unattractive. However, no clear evidence in support of this argument has been put forward to my Department. This matter has been looked at a number of times over the years. Bearing in mind the variety of hard minerals being sought in the land area of the country and the variety of settings in which such minerals can be found — which have a significant bearing on the profitability of such finds — there are serious practical problems about determining mining lease terms, in advance of discovery and evaluation of each deposit, that will give a fair and reasonable return both to the State and the operator. Furthermore, it would be reasonable, if lease terms were to be pre-determined, to take account of a highly profitable mine development situation and to indicate what the level of State "take" in such a situation would be.
Bearing these considerations in mind and, as I am satisfied that the terms of State mining leases granted to date have been at least as attractive as those obtainable by mining companies in other countries, I have been reluctant to fix future lease terms into a standard mould which could result in the State getting an inadequate return from the leasing of State-owned minerals.
Nevertheless, the industry was invited early this year to furnish their ideas as to how a leasing regime could be devised which would reasonably meet the concerns of the State and of the industry. I have received a limited response in the matter from the industry but it is my intention that further discussions should take place between officials of my Department and of the industry to see if the matter can be progressed further.
My Department, in consultation with the industry, have been vigorously pursuing the early adoption of an EEC scheme to aid minerals exploration within Community territory. Unfortunately, although the major share of the produce of Irish mines is sold in the Community — its natural market — a number of our partners in the Community do not share our urgency to get the scheme under way. Nonetheless, I am hopeful of an early resolution of the difficulties experienced by some countries with the scheme. While the total amount of money to be made available, £7.3m, is quite small, nonetheless, it could provide a useful stimulus to minerals exploration activity. Recent years have seen the closure of some of our largest mines, mainly due to exhaustion of their minerals reserves. The Tara Lead and Zinc Mine is now operating in a more satisfactory climate than in the difficult years after start-up in 1977 and Bula Ltd. is involved in discussions at present with a number of parties with a view to operational and financial arrangements which would permit commencement of development of the Bula orebody.
Gypsum mining and processing operations continue at Kingscourt and the barytes mine at Clonakilty has been taken over by new developers. Coal mining operations have expanded in the Leinster Coalfield and in Ballyingarry, County Tipperary. While the coal mining operations are small in themselves, they are serving to provide employment in a critical time for our economy in areas where employment opportunities are limited and they are contributing to a reduction in our dependence on imported coals.
Studies are proceeding with a view to development of the talc magnesite deposit at Westport, County Mayo, but it is too early yet to say when development will commence.
The Vote for my Department for 1984 amounts to £10 million. This is small in comparison to other areas of energy activity so, I have also outlined for the House the wide range of my responsibilities as Minister for Energy and the extent of the non-voted capital expenditure involved, £303 million this year, in the supply of energy by the State companies under my aegis. It is clearly vital that my Department have good working relationships with all of these companies. It is essential that we get value from this investment. As Minister for Energy I must also look to the optimum development of our indigenous sources of energy, peat and natural gas, to further promoting explorations for oil and gas, to enhancing our security of supply, to improving our energy efficiency, and to examining new sources of energy. This is a formidable and continuing task.
I recommend this Estimate to the House.
