The purpose of the Bill is to set up a statutory national gas board which will be the national authority responsible for the supply and distribution of natural gas.
Before dealing with the Bill itself, I would like to dwell briefly on the events which led up to the present proposal.
Surveying and drilling in our continental shelf area was initiated in the late 1960s by Marathon Petroleum Ireland Limited under an agreement concluded originally in 1959. The commercial gas field confirmed by Marathon in 1973 in the area south of Kinsale Head has been estimated to contain one million million cubic feet of gas, capable of sustaining a flow rate of 125 million cubic feet a day during a period of 20 years. This is not a major gas find compared to some of the North Sea deposits but it is equivalent to about 12 per cent of Ireland's present total energy requirements. Even more significantly it has confirmed the presence of hydrocarbons in commercial quantities in the Irish continental shelf and has given encouragement to the programme for the further exploration of our offshore area.
In considering the possible allocation of the gas, the Government had to take account of the fact that we did not have an established gas industry with the potential to absorb the flow of gas from this field from an early stage in sufficient quantity to remunerate the enormous capital investment involved. The Government, after careful consideration, decided to allocate this gas for a new plant to be built by Nitrigin Éireann Teoranta at Marina Point in Cork for the production of ammonia and urea for the fertiliser industry and for additional ESB generating capacity of 400 MW in a new station at Whitegate and the extension of the board's existing plant at Marina. An allocation is also being made available to Cork Gas Company to meet the requirements of their consumers.
The allocation of natural gas for the Nitrigin Éireann Teoranta project will assure supply of nitrogenous fertiliser to Irish agriculture and a surplus for export.
It has been stated by various commentators that the use of natural gas for electricity generation is not the most efficient method of utilisation and is a waste of natural resources. I would, however, like to emphasise that all conversion of fuel to energy is wasteful to some extent of the initial thermal content of the energy. The production of electricity, no matter from what fuel it is generated— whether imported fuel such as oil, or native fuel such as peat—involves some loss of value of the original fuel.
It has been suggested also that the allocation to the ESB is in conflict with the EEC directive on the use of natural gas in power stations. This is not the case. The directive in question, which incidentally was issued about a year after the Government decision on the allocation of the Kinsale gas find, does not prohibit the use of natural gas for electricity generation. What it does is to set out the circumstances under which the use of natural gas for electricity generation may be authorised. The use of part of the Kinsale Head gas for electricity generation is fully in line with the criteria set down in the directive. Moreover, the supply of natural gas to the ESB is on an interruptible basis and could be reviewed at a future date if circumstances made that course desirable.
While it is interesting to debate in a theoretical way the various ways in which natural gas can be utilised, one must not ignore the realtities which had to be faced in the allocation of our first gas deposit. Very heavy investment is necessary to develop the field and bring the gas ashore and distribute it. The financing of that investment can only be met from the revenue generated by the sale of gas. Our existing gas market amounts to only about 10 per cent of the output of the field and, while the availability of natural gas tends to increase the market, this takes place only over a period of years and also involves additional capital investment. The high rate of offtake required in the early stages to justify the heavy investment, both offshore and onshore, could in our present circumstances be provided here only by substantial users like the electricity and fertiliser industries. I would emphasise that the use of gas by the ESB will reduce the board's dependence on imported oil and thus safeguard the consumer against the worst effects of any future interruptions of international oil movements. This is, of course, an important element in our present energy strategy. In the light of all these considerations I firmly stand over the Government's decision to allocate portion of the Kinsale Head gas find to the ESB.
The development of the field and the associated onshore projects will involve total investment in excess of £200 million. The onshore construction projects will provide more than 2,000 jobs and there will be permanent employment for about 700 workers. The country's balance of payments will improve by an estimated £75 million a year and the total development will involve an accrual of new technology which will be of considerable benefit to the economy.
An important consideration in regard to the utilisation of natural gas and the arrangements for onshore transmission and distribution is the need for a system of co-ordinated national control. It is clearly important that indigenous energy resources should be developed and exploited to the best advantage of the economy as a whole and that the benefits both direct and indirect, should accrue to the community. Control on a national basis is also desirable so that uniformly high standards should be applied in the construction and operation of terminals, pipelines and associated installations. Accordingly, the Government decided early last year that a national gas authority should be established and they authorised me to undertake the preparation of the necessary legislation.
It will be appreciated that the preparation of legislation for the establishment of a new State-sponsored body takes a certain amount of time. To have deferred action on the development of the Kinsale Head field until a Bill was enacted and the new board established would have involved an unnecessary delay in bringing the gas on stream. Accordingly, in April last year I set up Bord Gáis Éireann Teoranta under the Companies Acts to undertake the conclusion of the negotiations with Marathon for the purchase of the gas and to initiate the planning of the onshore pipeline system.
The board's first task was, as I have mentioned, the conclusion of a contract with Marathon for the purchase of the Kinsale Head gas. The foundations for this contract had already been laid in the negotiations conducted initially by the ESB and NET with Marathon and, while ordinary commercial prudence dictates that the terms of the contract must remain confidential, I can assure the House that a very good deal was, in fact, negotiated. Contractual obligations between BGE and Marathon envisage a first delivery date of 1st April, 1979 for the gas. However, at my prompting and with the encouragement of the Minister for Industry and Commerce, both BGE and Marathon are pressing ahead with their projects with a view to meeting a target delivery date of early 1978.
As regards the onshore pipeline project, I understand that this comprises a combination of conventional engineering skills with certain gas technologies new to this country. I know that BGE saw this project from the outset as a pilot scheme on which the foundations would be laid for any future gas developments. Maximisation of the involvement of Irish enterprise and skills has been a plank in BGE's policy and it was in this context, and with a view to developing the gas technology expertise which was lacking within this country, that BGE found it necessary to obtain consultancy services from the British Gas Corporation. This decision met with a certain amount of adverse criticism at the time and it is only right that I should avail of this occasion to repeat my support for BGE's decision. The consultancy services being provided by British Gas are mainly of an advisory nature, covering matters such as safety codes and standards, design parameters and route selection, areas in which the necessary expertise was not available within the country. The engagement of British Gas does not mean that decisions on the placing of contracts have been taken from the hands of BGE. On the contrary, the awarding of contracts remains the responsibility of BGE and in this connection I was heartened to learn some time ago that two of the earliest contracts to arise were awarded to the ESB. These covered a feasibility study of the pipeline crossing of the river Lee from Little Island to Ring Mahon and detailed design drawings for the pipeline system.
The services of the Institute for Industrial Research and Standards have been retained by BGE to monitor the possibilities for Irish manufacturers and contractors and I understand that a number of Irish contractors have already expressed interest in the construction phase, some in consortia with experienced gas pipelaying contractors, a move which BGE welcomes and which I heartily endorse.
The principal onshore feature of any natural gas development is, of course, the construction of the underground pipeline. It is in the public interest that the construction of such pipelines should be subject to overall control by the State and it is with that in mind that I have framed section 8 to require the board to obtain my consent to the construction of a pipeline and to adhere to such conditions as I may specify regarding codes and standards of safety and efficiency in construction and maintenance. The section further provides that in the construction of a gas pipeline the Board shall take all reasonable measures to protect the natural environment and amenities including buildings and other objects of architectural or historical interest.
Furthermore, provision is made whereby the board in the selection of a route for the construction of a pipeline shall take into account the representations of any local or harbour authority or any railway, electricity, water or other gas undertaker concerned. The Minister for Local Government has agreed in the light of these statutory obligations that the laying of the underground pipeline shall be exempted from the requirement to obtain planning permission and he propeses to make appropriate regulations under the Planning Act in due course. In this respect the board's position will be similar to that of other gas undertakings. The provisions of this section will apply to the onshore pipeline being provided in connection with the Kinsale Head development, and, indeed, I understand from BGE that detailed consultations have already taken place and are continuing with interested parties, including the Cork local authorities, statutory bodies and other representative organisations.
The securing of wayleaves will be an important task in any natural gas pipeline project. Some 30 miles of wayleave are involved in the Kinsale Head project and the need for the co-operation of the farming community hardly needs to be stressed. Negotiations have been taking place between BGE and representatives of the landowners with a view to securing by agreement the wayleaves for the pipeline. It is, of course, important to ensure that a project as important to the country as a whole as the present one, or indeed any further natural gas development, is not frustrated or unduly delayed and, accordingly, provision is included in section 32 for the making of a ministerial order to authorise the board to acquire compulsorily land or rights over land. The Second Schedule to the Bill sets out the procedure to be followed in relation to a compulsory acquisition order. The board's powers to acquire land or rights over land are no different from those of other State bodies and local authorities who have to have such powers for the discharge of their functions. Provision is made for the normal safeguards for all interested parties such as provisions for the hearing of objections and representations and for independent arbitration on compensation terms.
At this point I should mention that the progress made by BGE to date gives every indication that, provided no exceptional difficulties arise, the gas should be on stream in accordance with our target date of early 1978. I am satisfied that this could not have been achieved if I had not taken the step of setting up BGE as an interim company in advance of the legislation. The company, Bord Gáis Éireann Teoranta, will, of course, be dissolved under the present Bill in the manner prescribed in section 35 but this does not mean that there will be any interruption in the project. Continuity and momentum must be maintained and the project will, of course, be carried through to completion by the Gas Board acting within the statutory framework which will be provided by this Bill. I think it is appropriate that I should express my appreciation of the work of both board members and staff in getting a new and complex project so well advanced within a comparatively short space of time.
The statutory board, which will be appointed by me, with the consent of the Minister for Finance, will comprise a chairman and not more than six other members. The First Schedule deals in detail with the constitution and membership of the new board, while sections 16 to 20 deal with matters relating to the employment of staff, consultants and so on.
The duty of the new board, as set out in section 8, will be to develop and maintain an efficient and economical system of supply of natural gas, as it may appear to the board to be requisite, with due regard to available sources of supply. The duty of the board will, of course, be influenced in large measure by the scale of natural gas deposits which may become available as a result of exploration activity in our continental shelf.
Offshore exploration activity is a matter which comes within the ambit of my colleague, the Minister for Industry and Commerce, and in this regard. Senators will note that section 36 provides for a consultation process on any development relating to a natural gas deposit. Furthermore, section 37 provides that all natural gas landed in the State or got in the jurisdiction of the State for consumption in the State, shall be offered for sale on reasonable terms to the board except in particular cases where it is considered that the gas should be offered for sale for a specified industrial use. Any dispute as to the reasonableness of the terms on which gas is offered to the Board will be determined by arbitration.
Section 8 also sets out the general powers of the board. These include powers to transmit, distribute and sell natural gas; to purchase and acquire natural gas from any source; to construct and operate pipelines, terminals and so on, and to carry out various works and activities to enable them to discharge their functions under the Bill. The powers provided in the Bill for the board are those which it is considered the board will require as far as can be foreseen. However, in a new area such as this, where rapid technological changes can take place, it may become necessary in the future to confer additional powers on the board and provision is therefore made in section 9 for the conferring of such powers on the board. These powers would, of course, have to be related to the provision of a supply of gas and could only be conferred by way of a ministerial order, which would be laid in draft before each House of the Oireachtas for prior approval.
The new board will be subject to the controls normally applicable to State-sponsored bodies. Accordingly, provision is included in section 21 for control of the capital commitments of the board. Sections 22 to 25 deal with the board's borrowing powers and are generally similar to the provisions applicable to other State-sponsored bodies. The Bill sets a limit of £25 million on the aggregate amount of long-term borrowing which may be incurred by the board for capital purposes. I should like to emphasise that this is a limit and not an allocation. While the limit may be more than enough to meet the board's requirements arising from the Kinsale Head development, and for investigating the possibilities and forward planning for the utilisation of any further finds, it would not be adequate to meet requirements arising from any significant gas finds and any proposals for financing of any substantial new projects will therefore have to come before the Oireachtas in the form of an amendment to this Bill. This will, of course, give the Oireachtas the opportunity of debating the general activities of the board and the policy being pursued in natural gas development.
It is intended that expenditure and borrowing by the board will be financed from revenue from sales of gas. Section 10 deals with this aspect and, in this connection, Senators will note that a separate section—section 11—is included to permit my giving the board directions as to financial objectives and pricing policy and the application of the board's profits. The latter could, if I so directed, be applied for the benefit of the Exchequer. It has been suggested that the Bill should impose a statutory limit on the amount of any State take under this provision. It has also been suggested that in giving directives under this section, I should be required under the legislation to keep the price of gas as low as possible even if it is significantly lower than the price of other forms of energy. I am not in agreement with these proposals. I consider that it should be left in the hands of the Government of the day to take decisions in these matters as best suits the national interest from time to time. Furthermore, I do not consider it equitable that all the benefits from a natural gas deposit should necessarily be restricted to particular users. The benefits of a gas find could as far as possible be spread over the nation as a whole and it would be very unwise to make rigid statutory provisions at this stage which might limit the future options in this area.
I have not dealt in detail with all the provisions of the Bill because many of them are fairly standard for any State-sponsored body and also because an explanatory memorandum has been circulated which gives a general outline of the Bill. If, however, there is any matter which Senators may wish to raise about any of the provisions which I have not dealt with, I will be happy to deal with them in my reply to the debate.
With the possibility of further gas finds, it is now necessary to give careful consideration to all options for the utilisation of natural gas. Within the energy sector, gas could be used for power generation and could be fed through a pipeline system for direct heating and cooking uses. Natural gas also has considerable advantages as a feedstock for petrochemical industries. Decisions on the allocation of gas will have to take account of all relevant factors including market capacity, investment costs and the related economic consideration and the comparative efficiency ratios of various uses. The nation is entitled to use its resources in a way which will optimise the benefits in terms of energy security and stability, employment creation and value added to the economy.
With those considerations in mind I am arranging for an objective and authoritative study of all possibilities of natural gas. On the basis of such study, realistic options on the allocation of future finds can be identified and assessed without delay. Decisions will have to be taken within the context of general energy and economic policy and matters of such great significance for our future development will obviously be decided at ministerial level.
The setting up of Bord Gáis Éireann is a complementary measure to the offshore policy decisions already announced by the Minister for Industry and Commerce. It is an important stage in the planning and utilisation of our national energy resources and it is a step into the future which will broaden our technological base and strengthen our infrastructure in a way which will significantly facilitate our economic progress. I commend the Bill to the House.