I am glad of the opportunity to make a brief contribution on this report. I welcome the Minister's introductory speech and his comments in relation to the energy policy document which will be published shortly. In that area there is a great need for information with regard to heating in particular for people building new houses and I hope the Minister will include such information in his policy document. While the Institute for Industrial Research and Standards help many people and while the Hotline telephone call system is open to the public for at least part of the year — unfortunately it is not open all year round and I urge the Minister to consider making this service available all year round — nevertheless many people are unable to pay a heating engineer and are, therefore, unaware as to what is the best method of heating their homes. In the United Kingdom at present a considerable amount of money is being spent in this energy efficiency year and this was highlighted by the recent exhibition in Milton Keynes, of which I am sure the Minister is well aware. The same consultancy opportunities should be available here.
The Minister has said that gas is not in competition with coal or turf but I disagree with him. In domestic heating gas is in the second category but the Minister has put it in the first category. Assistance should be readily available for people in this situation and I hope that the Minister in his policy document, which I warmly welcome, will include such assistance. I look forward to that document in the near future.
I am glad the Minister has given a very positive welcome to the recommendations of the committee. He dealt with them in detail and, therefore, I will not repeat them but I am glad he has given a positive welcome to the recommendations which are included in the summary at the beginning of the report.
I pay tribute, as I always do, to the members of the committee for their hard work in producing this important report. It is straightforward and comprehensive and is very timely. At the beginning of the report we are given a précis of the situation with regard to Kinsale Head, which is 30 miles off the Cork coast and it gives the geological details which apply to it. It also covers the difficulty in getting the gas to the mainland and explains that the gas is transferred by means of a 24" pipe. This is dealt with later on in the report.
In regard to my initial remarks about domestic buildings, while I understand the advantages of gas — and these have been covered very well in the recent debate which we had on the Air Pollution Bill, 1986 — it is interesting to remember the Milton Keynes situation where nearly all the houses are heated by gas and they have gas for cooking purposes. Nevertheless, the house with the lowest cost index for heating was heated by electricity. That is very important to remember. Perhaps more could be done to market electricity for central heating. Quite a lot has been done in this regard but there is much scope in the area of off-peak electricity. We have the ESB network of wiring throughout the country to which many people have objected and which aesthetically is not very acceptable, whereas in the case of gas it is all underground. With gas supply we have a finite situation and with electricity the network is there for many generations to come. All of these things have to be taken into consideration when evaluating whether heating by gas or by electricity is the better choice.
The ESB are BGE's largest customer to date and, according to projections contained in the ESB's annual report for the year ending 31 March 1984, they will virtually cease using gas after 1989 when the Moneypoint coal burning station in County Clare becomes fully operational. The Minister dealt with that and it is mentioned in the report.
The ESB have an obligation, and it is quantified in the report, to take a certain amount of gas per year and under contract if they do not do so they have to pay the price. The report states that gas paid for but not used in a given year may be drawn off in a subsequent year. I would like to know what is the present situation. Is it envisaged that that problem would arise? In a sense it might not be an altogether undesirable thing. Surely it would result in reduced prices for the following year or years. I could envisage this happening for a number of years and perhaps after seven or eight years what would amount to free electricity would be available. Perhaps the Minister would comment on this in his reply.
The report says:
Originally the pressure of the gas leaving the Kinsale Head gasfield was 1,000 p.s.i. This has now fallen to 740 p.s.i. as a result of the offtake of gas since commencement of production.
I understand that to mean that, because of the depletion of gas in the Kinsale Head, we have a reduction of about 25 per cent in the pressure. According to the report it may be necessary to introduce compressor equipment to increase the pressure to the required level. Therefore, as the further use of the Kinsale Head gas continues, when 50 per cent of the gas is used we will have the pressure reduced by 50 per cent. I wonder if the proposed compressor equipment is very costly. I am sure it will involve some considerable cost and I wonder if this is being taken into consideration. Perhaps the Minister would refer to that briefly when he is replying.
The gas, of course, is completely odourless. A sulphur based chemical has been added to give the gas a smell which I suppose is necessary. As with the Air Pollution Bill, 1986, not enough consideration has been given to the problem of smell but, in this instance, the smell has been added in order to eliminate danger and I welcome that. In relation to natural gas the report states:
Natural gas is a highly attractive fuel with many commercial and industrial applications. Because of its flexibility in use, ease of delivery and cleanliness it is favoured by large users of energy for heating and processing, particularly where accurate temperature control is required. In Europe domestic consumers account for the next largest user category after industry. In Ireland natural gas consumption by private industrial and domestic users has only been partially developed.
Nevertheless, while that is so, heating engineers, by and large, have specified more for gas in the past few years. Quite apart from the advantages with regard to costs and being odourless, it is unnecessary to provide a chimney which is a saving in many instances because as in the case of oil, for example, a balanced flue may be used which means there is a very simple connection to the exterior. This is another attraction of gas.
Gas has helped to reduce Ireland's dependency on imported fuel from a high total of 80 per cent in 1979 to 61 per cent in 1983 which in round figures is one-fifth and this is very considerable. In 1984 natural gas accounted for 54 per cent of the fuels used by the ESB to produce electricity.
Then the report comes to what I feel is a very important part. Paragraph 9 states:
The Kinsale Head gasfield originally contained 1.253 trillion (million million) cubic feet of gas — about 20% of Ireland's total energy needs for twenty years. In 1984, according to BGE's annual report for that year, 21% of the total primary energy demand was met by natural gas. The value of the gasfield to the nation at 1984 oil prices is about £7 billion — say £350 million/year over its 20 year life. The field now produces more energy than the combined output of the ESB and Bord na Móna.
In summary we are told that this contributed a cumulative £182 million to the Exchequer in 1984. The payments in 1984 were £71 million and cumulatively helped the national balance of payments by £1,327 million and in 1984 by £367 million. I wonder what the position would have been if this had not been discovered as these are very considerable figures.
A favourable contract with Marathon provides for a drawdown of the gas over a 20 year period to 1999. Again the Minister has referred to this. The base price of the gas is indexed to annual movements in international oil prices as defined by Platt's index and the exchange rate of the Irish £ with the US dollar.
This seems a bit complex. The Minister said with regard to the first recommendation of the report that flexibility meant lowering the price. By and large I agree, but it might also mean lowering the price or making a concession for a period. As was brought out in the debate on the wider share ownership motion last night some firms may be in difficulty for a short time and it would be sufficient if they got some kind of concession over a short period. This may well have been in the committee's mind when they referred to flexibility. Bord Gáis Éireann are one of the few State boards operating completely outside Dublin. On a first reading I am satisfied that the position is so but then the report goes on to tell us that:
The Joint Committee was informed in evidence that a high proportion of senior executives' time is spent commuting to Dublin in order to attend meetings with the Department of Energy, Dublin Gas commercial banks and legal advisers.
Although the report does not state so categorically, it seems to me there is some implicit condemnation of that situation. It seems right in one sense that the whole operation should be outside Dublin, and decentralisation is something all of us would favour. However, it is unfortunate that so much of the time of senior executives is wasted travelling to Dublin. This is an important aspect that could be looked at. Perhaps some other arrangement could be made? In this day and age when communication is so much easier, it should not be difficult to devise ways that would be acceptable and would overcome this problem.
In the annual report of Bord Gáis Éireann for 1983 it is stated that in the near future it is hoped to extend the national gas grid to Limerick, Clonmel and Waterford. The Minister has dealt with that. Paragraph 14 of the report states:
...the principal reason for the delay in providing gas to Limerick resolved upon negotiations concerning the ultimate shareholding structure and the proportion to be held respectively by private and State shareholders.
It seems unfortunate that this kind of problem would result in withholding gas from such an important centre. The report states:
The joint committee was also informed that, having regard to the cost of connection to the grid, the supply of gas to smaller towns might best be done through the use of compressed natural gas, CNG, delivered by bulk tanker. It is understood that Wexford town will shortly be supplied on this basis.
The use of bottled gas in this way is long established. Perhaps the committee could have gone into more detail to determine the costs, particularly the transport costs involved, and whether they would make the proposition uneconomical. It seems to me to be a very good suggestion. In rural areas in the past bottled gas was used quite widely. For a time this product was withdrawn by the companies, presumably because of the high cost of transport. When it is possible to supply compressed natural gas in bulk tanker there is no reason why any area should be without it.
In relation to the domestic market in the context of rural areas not being near the pipeline, the committee could have gone into this in greater detail because of the potential. Nevertheless, the Minister has given a positive response to the recommendations and I am happy that if there is a future in this regard on a wide scale the Minister will follow it up.
Paragraph 16 of the report states that:
...the joint committee was informed that the Aughinish Alumina Ltd. (AAL) would constitute a major load for BGE — 25 m.c.f. per day compared with the ESB's current usage of 160 m.c.f. per day.
While it is a considerable amount, compared to what the ESB use it is rather insignificant. The report tells us that it has not been possible up to the present for BGE to supply gas to Aughinish Alumina Limited without the pricing guidelines laid down by the Department of Energy. These pricing guidelines are dealt with in detail. They are based upon the price of heavy fuel oil and the position of the dollar. The report tells us that these guidelines are continuously under review and this is important in such a changing situation. The report further states that:
The joint committee is concerned about the slow pace, since the completion of the Cork-Dublin pipeline in 1982, of making natural gas available to Clonmel, Limerick and Waterford, other towns en route, and in general, to industry.
I agree with that. It seems unreasonable that gas was withheld from those areas which are contiguous to the pipeline. The report notes that the experience of supplying natural gas to industrial estates in the Cork region has resulted in 2,200 job approvals by the IDA which is quite a considerable number at present when there is so much unemployment. It emphasises the importance of proceeding to make gas available on as wide a scale as possible in as short a period as possible. The report states:
BGE, when negotiating with potential customers, is invariably queried about continuity and the availability of supplies of gas after the Kinsale Head gasfield runs out in 1999.
This is a very important area and it is a question that would have to be asked by anyone considering the situation. I am not sure that the replies given are as comprehensive as they might be. A fairly honest attempt has been made to deal with the situation and there is a précis of the situation. The report states:
Prior to the recent announcement of a further, as yet, unquantified offshore find, there were no alternative sources from which gas could be drawn off. The fact that the entire network is, at present, supplied from one 24" pipe from the Kinsale Head gasfield, places the entire grid at risk. In the event of a interruption in supply apart from the inconvenience caused to domestic and industrial consumers, the ESB would be deprived of more than half of its input fuel at a single stroke.
This is a rather serious situation. I have some experience of pipes on the seabed in the Haulbowline area. This matter should have been considered at the laying stage and it would have been easier to lay a number of pipes with the required capacity, in case of some accident or sabotage. It is wrong that the gas supply should be dependent on one pipe and it should be looked at very soon to see if an alternative can be arranged. Paragraph 19 of the report states:
In a written submission from BGE the joint committee was informed that it has commissioned the Institute for Industrial Research and Standards to undertake a risk analysis of the likelihood and consequence of an interruption in gas supplies and the possibility of using a radar surveillance system to monitor the movement of vessels in the vicinity of the pipeline is also under consideration.
Perhaps the Minister in his reply would refer to this and bring us up-to-date on whatever communications have been received from the Institute for Industrial Research and Standards because it is an important aspect. Alternative sources of supply, in the absence of any further indigenous and substantial discoveries will need to be negotiated prior to 1990, either via a link to the UK gas grid or through direct imports of liquified natural gas. The situation is not as serious as I would have thought if it is possible to connect to the UK gas grid. I wonder if it is as simple as that. Have negotiations been carried out? What about the price structure? In his reply, I would like the Minister to give us some information in this area. We are told in the report that representatives of the Confederation of Irish Industry expressed the view that the level of offshore drilling activity depended upon the conditions attaching to the licensing terms. I recall some improvement in this in the not too distant past. I welcome that improvement and I hope that it will result in more drilling and more wells being discovered.
The report tells us it was also suggested that conditions should be made more attractive in order to increase the level of drilling activity up to, say, 20 wells per year, thereby increasing the probability of finding more natural gas. The conditions have been improved. I do not have all the details but I know they have been improved. I wonder what has been the result. Perhaps the Minister would let us know whether as a result of the improved conditions drilling will be increased to his satisfaction. The report tells us Bord Gáis Éireann have a relatively limited number of customers. This is so. In Ireland for example, if somebody decided to use gas as a source of heating in a new house that would mean automatically the ESB would lose a customer. We must take all these aspects into consideration. The ESB and Nítrigin Éireann Teoranta have provided the cashflow which in turn has helped to fund the entire national grid inclusive of the Cork to Dublin pipeline, the Cork city pipeline and the conversional development plans for both the Cork and Dublin gas utilities. Senator Ferris dealt with that aspect. He explained that conversion means the cost of adjustments to appliances so that they can operate on natural gas and development means the seeking out of new markets for gas. While this is limited to some extent, it also has the disadvantage that it takes a customer from some other area. Nevertheless that cashflow provided by the ESB and NET must be welcomed and we must pay tribute to them.
The price of oil against which BGE must compete is not only governed by international supply and demand but also by the prevailing exchange rate for the US dollar, universally used for pricing oil products. I have referred to this already. it seems a complex structure and a difficult area. The matter must be kept under constant review, as we are told in the report it is.
The representatives of the Confederation of Irish Industry queried the pricing structure of natural gas for industrial users. They advocated a price which would be mid-way between the present price to industry and that paid by BGE to Marathon. It was claimed that such a reduced price would be more in line with that charged by other European countries and that it would have the following effects: (a) facilitating the allocation of the ESB quantities post 1989; (b) accelerating economic activity; and (c) helping the balance of payments by displacing important imports of fuel oil. The joint committee were informed that the Confederation of Irish Industry would be willing to assist Bord Gáis Éireann to locate clusters of industrial uses which collectively would justify the cost of a spur line from the main grid. This is important. I welcome it. Bord Gáis Éireann should take advantage of this because it is more economic to supply the gas to areas of dense population or dense industrial use rather than isolated areas. Bord Gáis Éireann have been offered help in this area by the CII and they should avail of it.
The committee are of the opinion that, notwithstanding the need to maintain an energy related price structure for gas, more flexibility should be applied by BGE in their pricing policy for individual industrial consumers. I have dwelt on that before. It is the first recommendation of the committee. The Minister responded to it but I think he dismissed it in a rather peremptory fashion. I am not being critical of the Minister's speech in that regard but I do think it is worthy of far more serious consideration, perhaps in the area of firms who might have a short term problem.
The report is timely and comprehensive. It deals with a difficult situation in an area where not everybody sees eye to eye. In the past because of concessions or dealings with Dublin Gas a Minister resigned from the Government. I do not think it is appropriate to go into that in any depth. I just mention it to underline the fact it is an area where not everybody will see eye to eye, not even all members of the Government. It is important when we are dealing with a commodity that has only a short life span that there should be a consensus that this commodity of gas would be marketed to the advantage of the country in the best possible way. For that reason I welcome the report and the Minister's positive response and I look forward to his final reply to this report and to answers to some of the questions I posed.