Seanad Éireann debate -
Wednesday, 10 Dec 1980

Vol. 95 No. 5

Gas (Amendment) Bill, 1980: Second Stage.

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

Minister for Industry, Commerce and Tourism (Mr. O'Malley)

The purpose of this Bill is to raise from £25 million to £30 million the limitation both on the aggregate borrowing powers of Bord Gáis Éireann for capital purposes and on the aggregate of such borrowings which may be guaranteed by the Minister for Finance.

The current limitation of £25 million is set under the Gas Act, 1976 by section 23 in regard to the board's capital borrowings and by section 25 in regard to borrowings which may be guaranteed by the Minister for Finance. The amendments now proposed are to enable the board to borrow in order to continue with their gas distribution projects in the Cork area. To date the total borrowings of the board amount to about £24½ million. This leaves an insufficient leeway for borrowings for capital projects for the remainder of the year and leaves no scope for borrowing in 1981.

As Senators know, following the discovery of natural gas off Kinsale Head, Bord Gáis Éireann were established under the Gas Act, 1976 to develop and maintain a system for the supply of natural gas. The board have carried out with diligence their duties in the intervening years since their formation and deserve to be congratulated. A transmission system from the offtake point at Inch to the ESB generating station at Marina was completed in 1977 ahead of time and within budget. A spurline to supply Nítrigin Éireann Teoranta at Marino Point was also completed in 1977.

In 1979 spur pipelines were constructed to the ESB generating station at Aghada and to the IDA industrial estates at Little Island and the Mahon Peninsula. Construction work on the natural gas pipeline to the Cork Gas Company works in Cork city was started by the board at the end of 1979 and completed in mid-1980. On 14 November last initial supplies of Kinsale gas were delivered to the company. Initially the company will supply town gas reformed from natural gas. Conversion of all consumer appliances to use natural gas directly is being planned and will be undertaken over the next four years. The Cork Gas Company plan that by 31 December this year all gas supply to their 27,000 customers will have natural gas as the feedstock. A further extension of the natural gas pipeline to Ringaskiddy was recently completed. This will supply Irish Steel Ltd., and the IDA industrial estate at Ringaskiddy. These are the hard core of projects for which capital borrowings of £24½ million were made by the board.

As a result of the availability of Kinsale gas in the Cork area about 600 extra jobs have already been created. About 652 jobs will become available arising out of industrial projects for which an allocation of natural gas has been already approved and there is the prospect of further jobs in connection with future natural gas based industries.

Kinsale gas is almost pure methane. It is virtually sulphur free and has a high calorific value. It is thus a highly efficient and valuable fuel source, and should not be allocated in a haphazard way. The Town Gas Industry Review Committee concluded that, pending the implementation of a reform programme within Dublin Gas and a decision on the question of a Cork-Dublin gas grid, a restrictive policy should be adopted in regard to new allocations of Kinsale gas. I agree with that conclusion. I have decided that, pending a decision on the Cork-Dublin pipeline, allocations to industry by BGE should be confined to new industrial undertakings where the use of natural gas would be a premium use and where its availability would be a major consideration in the decision to set up the industry here.

I think it is appropriate to emphasise at this stage that this Bill relates specifically to the raising of the board's borrowing powers to finance projects in the Cork area. This extension of BGE's borrowing powers is independent from and is not intended to pre-empt a decision on the feasibility of building a Cork/Dublin pipeline.

The Cork-Dublin pipeline project is composed of three elements. First, Bord Gáis Éireann have been asked to undertake a detailed feasibility study in line with best commercial practice encompassing the design, routing and costing of such a pipeline. The second element is the implementation by Dublin Gas Company of a development plan for the company. Consumers Gas, Toronto, were commissioned by Dublin Gas to examine the company's operation and recommend a strategy for the company which would make it a suitable vehicle for the efficient distribution of natural gas. Dublin Gas progress in achieving the performance targets set by the consultants is being monitored by my Department. A works agreement is currently being negotiated between Dublin Gas management and unions as an essential step in the reform programme.

The third element is the preparation of a financial package to enable the project to go ahead. No decision will be taken on the supply of natural gas to Dublin Gas Company in advance of the satisfactory conclusion of BGE's feasibility study and the demonstration by Dublin Gas Company, through the successful implementation of the reform programme, of their capability to distribute natural gas efficiently, cost-effectively and safely. If at that stage a Government decision is taken to go ahead the necessary legislation will be introduced.

Bearing in mind that to-date Bord Gáis Éireann have achieved the purposes for which they were established, I am confident that the House will support this Bill which is designed solely to enable the board to borrow for projects in the Cork area over the next few years. I therefore recommend the Bill to the House.

Mr. Cooney

The Fine Gael Party will support the proposals in the Bill to increase the capital and borrowing powers of Bord Gáis. I should like to join with the Minister in complimenting the board on their level of operations to date. There are, of course, some very great decisions to be taken with regard to the future and the Bill is a bit short on information as to the Government's thinking on these matters.

One critical piece of information is how much gas there is in this field. We have seen newspaper reports recently that the extent of the gas field is larger than first reported. One would like to know if any hard assessment has been made or can be made as to the full extent of the field. That knowledge would appear to be a condition precedent to any plans for the future use of gas, whether in the Cork area or in a wider context. Also it would be of critical importance in deciding whether the main thrust for the use of gas should be industrial or whether it would be permissible to make it available for domestic consumption.

The Minister devoted a fair amount of his speech to talking about the Cork-Dublin pipeline project. It is quite clear from what he says that this is still at a very early stage of consideration. Certain very serious and complex studies have to be carried out before any decision can be made. Is it implicit in the results of those studies that gas is going to be made available for domestic purposes in Dublin? Is this not something that could be debated in a wider economic context with regard to the proper utilisation of gas, to the end product to which the gas should be put? Is this not something that would have to be decided on a macro-economic basis? If a decision were to be in a certain way, then there would be no point in feasibility studies about the cost or otherwise of bringing gas to Dublin. If these studies come up with figures that are right as to the cost of bringing gas to Dublin, and if the Dublin Gas Company can show capacity to use it and provide it for the citizens of Dublin, and if there would be a financial package available, is it implicit that a decision has been taken that Kinsale gas will be made available for the citizens of Dublin? Serious consideration must have been given to this fundamental question. Implicit in the decision to proceed with these studies there must be an element of a decision: yes, if these studies are okay we will bring gas to Dublin. We are entitled to know at this stage if the hard thoughts of the Minister are along those lines.

We have been reading recently of contacts between the Minister and his counterpart from the Northern Ireland Office, obviously discussing the possibility of bringing gas from Kinsale up to the North. These discussions have been continuing and there have been newspaper speculation and reports that the matter is being discussed in realistic terms as if it has a feasibility quality about it. All of us would welcome such a development for more reasons than merely economic ones; for social and political reasons it would be welcomed as a tangible indication of the geographic unity of this island, something which people in some areas are inclined to ignore. But I would like to know if it will ever be feasible. I presume that continuing exploratory meetings between the Minister and his counterpart in Northern Ireland would not be taking place unless there is some information or thought in the background to show that something on these lines is feasible. This goes back to the basic question of how much gas there is in the gas field, and of deciding on the priorities for its use — domestic, domestic-cum-industrial or just industrial only. It gets back to the basic question of the rate of use because it is a finite reserve and the future in regard to energy sources is obviously clouded and uncertain. This is the one positive energy resource we have apart from turf.

This Bill would appear to be the appropriate vehicle for the Minister's thoughts on the proper rate of extraction. Possibly it is not technically feasible to determine with reasonable accuracy the level of the reserves in the Kinsale gas field but we would like to be told that. If it is not technically possible to obtain this information, obviously any plans for future development of the gas system have to be very tentative indeed, so tentative that it constrains the Minister to confine the development of the grid to the Cork area so that it can be used at the first point of shore access, which would be the most economic point of use.

While we agree that the extra borrowing and increase in capital for the gas board is desirable, there are many questions which remain to be answered. In the context of the questions I have posed, the increases being proposed here by the Minister are puny and obviously are designed to enable the board to provide very limited extensions in the Cork area.

Another slight criticism I would have of the Bill is that it is very short of hard information on what exactly is proposed in the Cork area. We have been told of the developments that have taken place so far and the spur pipelines that have been constructed to the ESB, to the IDA estate and to NET. The Minister mentioned in his speech that it is appropriate to emphasise at this stage that this Bill relates specifically to the raising of the board's borrowing powers to finance projects in the Cork area, and that this is separate from the whole Dublin issue. I take that point but it would be useful for us to know what precisely is planned in the Cork area, what increase in volume of use is planned for the Cork area and how this relates to what I submit is the critical question, that is, the extent of the reserves. I look forward to getting some further information on these matters from the Minister when he replies.

Mr. Kennedy

I am very pleased indeed to hear about the employment potential arising from the availability of Kinsale gas. In this connection I wonder if the Minister is in the position as yet to indicate the actual industries to which the allocation of natural gas has already been approved. In so far as new industries might be concerned, could the Minister also indicate whether it is his intention to give them preferential treatment in respect of prices and so on as an extra inducement to open up industries, especially in the Cork area?

Dr. West

I also welcome this Bill and I share some of the feelings expressed by Senator Cooney. The basic problem in any discussion of this particular resource is the extent to which the actual resource is available. While it may not be possible to give very accurate figures, the newspaper speculation which in recent times has indicated that the Kinsale field may be considerably bigger than originally announced is something to which the Minister should refer. Clearly one cannot be pinned down. The reserve may be considerably bigger even than the newspaper estimates. It is one of the crucial factors in making any decisions about the future use of the natural gas in the Kinsale field. We want to have some idea of the reserves that are currently estimated to be under the sea.

There has been a certain amount of comment on the particular uses to which the gas is put. Apart from the domestic use, initial industrial uses were for generation of electricity and for the NET project. Certainly I have seen adverse comment attached to both and on the lines that neither of these projects is the most economic way to use such a resource. I am not in a position to know one way or the other whether this is correct. A worrying feature is the fact that the State subvention required for the NET factory seems to of a very high order indeed. I would like the Minister to say in his reply whether he thinks that the initial decisions to use the gas in the generation of electricity and in the production of fertiliser were the correct ones and whether this sort of policy is to continue.

Minister for Industry, Commerce and Tourism (Mr. O'Malley)

I thank the Senators who spoke and I will endeavour as best I can to deal with the matters to which they referred.

Senator Cooney inquired in particular about the reserves of gas in this field and whether any re-examination had been done that might lead to a revision of the existing estimate. It is not easy to be accurate to any degree of fineness in regard to reserves in a gas field. The current official estimate of the reserves is 1,000,000 million cubic feet which would envisage a take-off of 124 million cubic feet per day over 20 years. It is no secret that a re-evaluation will take place of the estimated reserves over the next few months. I understand that it is not an easy or a rapid proposition to make this examination because it entails pumping from all 14 wells that exist in that field in different ways at different times to measure pressure under different conditions in various parts of the field. A very complicated mathematical sum has to be done at the end of it all to try to come up with a figure.

There are prospects, certainly that the reserves may be greater than the current estimate but one would be hesitant to go beyond that. It should be borne in mind by the House that even if the reserves prove to be greater it does not necessarily follow that the daily take-off rate would prudently be increased because it might affect the pressures and the basic structure of the field. A bigger reserves might mean a longer life but not necessarily a greater daily take-off of gas.

Senator Kennedy inquired about which industries had a supply of natural gas in Cork. Apart from NET, the ESB and the Cork Gas Company who have been referred to already, the other industries are Ridge Tool Company, Irish Steel, Pilmar Farm Chemicals, Duscholox Limited, Cara Partners, FMC, Cantrell and Cochrane, Foto Laboratories, American Gauge and Machine Company, John A. Wood, Measurex and Marathon. There are four others in respect of whom a recommendation has been made by Bord Gáis Éireann which is currently being considered by the Minister for Energy. All of these, with the exception of Irish Steel which is in Ringaskiddy, are either in Little Island or on the Mahon Peninsula. It is envisaged now that the pipeline has reached Ringaskiddy on the western side of the harbour that it will be available to suitable users who will be established on the very large industrial estate which runs to about 1,000 acres at Ringaskiddy.

I felt it necessary about two years ago to suggest to BGE that they should run that pipeline in order that we could open up for development the western side of Cork harbour. I am conscious of the fact that the eastern side is very heavily developed, by Irish standards, with relatively heavy industry. The site available at Ringaskiddy was underdeveloped for a number of reasons, mainly a lack of infrastructure. So far as port infrastructure is concerned, that defect has by and large been remedied now by the building there in the past couple of years of jetties by the Cork Harbour Commissionmers. There have been considerable improvements in the road infrastructure, but unfortunately there is still a bottleneck as one enters Cork city. I do not think it will be finally solved until there is some very radical way of avoiding traffic from the Ringaskiddy area having to go through Cork city and that obviously is a very long-term and extremely expensive proposition.

Regarding the making available of gas to future industries, one would prefer to see it used as a feedstock rather than just as an alternative form of fuel. I emphasise that it is undoubtedly valuable as an alternative source of power but less valuable than where it is used as the feedstock.

Dr. West

Would the Minister explain?

Mr. O'Malley

Rather than just for raising heat or something of that kind which can be done equally well but perhaps more expensively by electricity or by oil. In the glass industry for example, it would form a much more integral part of the actual manufacture of the ultimate goods produced as a result of the manufacturing process.

Mr. Cooney

Making cheap ammonia.

Mr. O'Malley

Glass, for example, would be an ideal industry for premium use of this. In theory the manufacture of ammonia is a premium use but we will have to leave it at that. On the question Senator Cooney raised as to whether the usages decided on were the right ones or not, I suppose it is easy enough to be wise after the event, but there is one factor that people should bear in mind and which is not borne in mind by many commentators. It is that we would probably never have got the gas out of the ground if two large-scale users of it were not provided from the start. Statments are being made nowadays on the false assumption that the gas is ashore anyway and that therefore it should be diverted into other better uses. The gas would never have got to the shore if the take-off of substantial quantities by the ESB and NET could not have been promised and arranged from the beginning of the period of negotiation for the production of the gas.

It is, of course, very unfortunate to see what has hapened in NET. I am sure every one of us regrets that very bitterly and it has been a sore and sorry lesson for public enterprise in this country. It has ended up in the appalling way that it has but I am afraid we just have to face up to the facts of the situation that exists today and try to make the best of it. It has implications which go on a long way beyond the fertiliser industry. Deep consideration of the basic problems that exist is by no means over. I was informed by the chairman of NET within the last few days that their forecast losses which were given to me during the year have, unhappily once again, as is the want in this particular company, proved to be very much on the low side. The losses this year are astronomical, being a combination of trading loss and a currency exchange loss which, in fact, is not incurred but which must be allowed for in the current year in their accounts.

It is certainly disturbing to find this situation. If one divides the loss by the number of employees in the company one comes up with a figure that possibly would not be acceptable if it were talked about in terms of capital grants for a permanent IDA project of high technology. That has to be accepted, apparently, as a running annual loss on the current side in a semi-State trading company. That has many implications when we consider it.

On the possibility of gas in Dublin, the Minister for Energy dealt with that fairly fully on a number of occasions recently. As I pointed out in my speech, there are three things that have to be done. Obviously BGE will have to do a full feasibility study; Dublin Gas will have to put their house in order; and some efforts will have to be made to see whether a financial package can be put together. However, it does not necessarily follow if all three of these are complied with that a decision will then be made. The decision could not in fairness be made until the Government saw what the situation was under those three headings; likewise for example, if the Dublin Gas Company are not able to put their house in order, it does not necessarily follow from that that the possible project should fail if the Minister was able to devise some other means for the distribution of gas. I am not personally familiar with the up-to-date situation in Dublin Gas but I have had experience of the company over a number of years and unless there has been a very radical change in recent months one would feel it necessary to say that it is a pity that the problems there cannot be faced and overcome more rapidly than has been the case in the past.

On the question of a possible link with Northern Ireland, the House will know that the Minister for Energy had a meeting on 5 December with Mr. Giles Shaw, Parliamentary Under-Secretary of State with responsibility for energy matters in Northern Ireland, and a statement was issued after that meeting, the relevant part of which reads as follows:

The Minister has had useful exchange of views during which Mr. Colley provided Mr. Shaw with more precise information about the Republic's intentions concerning the development of the Kinsale field and its plans for the distribution of the natural gas. Mr. Shaw said this information which is new could have a bearing on his Government's policy for the gas industry in Northern Ireland, that he would obviously have to assess the implications in greater detail and this he would be doing as a matter of urgency.

There are, of course, many reasons, as Senator Cooney mentioned, other than just purely economic ones why it might well be attractive for Northern Ireland and ourselves to have a gas grid extending from Cork to Belfast but at the same time, we have to be realistic about it. We are without an electricity inter-connector for the past six years and I believe the prospects in the immediate future of its being restored are not good. The newly-appointed chief executive designate of the ESB mentioned this yesterday. We must bear in mind that if it is not possible to maintain an electricity inter-connector, the chances of maintaining a gas grid must be much less. Of course, gas flowing through pipes, for the most part over the ground or very close to the surface, is far more vulnerable than electricity and the consequences of the pipeline link being blown up by terrorists are much more serious than the consequences of an electricity line being knocked down.

These are most of the points that have been raised in the course of the debate. Senator Cooney mentioned that the increase proposed here is very small but, of course, that is deliberate. It is only £5 million and it is mainly to enable further connections or spurs to this pipeline to be made to industrial estates in and around Cork. The Minister for Energy thought it appropriate to confine the additioal moneys refered to in this Bill to that purpose alone because if substantial moneys were required afterwards in connection with the pipeline or grid to any place outside the Cork area, it is only right that a Bill should be introduced and that both Houses should have the opportunity to discuss the policy involved.

Question put and agreed to.

Agreed to take remaining Stages today.