Seanad Éireann debate -
Thursday, 13 Nov 1986

Vol. 114 No. 15

Third Report of Joint Committee on Commercial State-Sponsored Bodies — Bord Gáis Éireann: Motion.

Mr. Ferris

I move:

That Seanad Éireann takes note of the Third Report of the Joint Committee on Commercial State-Sponsored Bodies — Bord Gáis Éireann.

I welcome the opportunity for this House to consider this excellent report from the committee chaired by my colleague, Deputy Frank Prendergast. There is a summary of its recommendations on pages 1, 2 and 3. I commend the members of the joint committee who have dealt with this very important commodity — natural gas. The Minister has drawn up the formula in which natural gas will be dealt with in the formulation of Bord Gáis Éireann, that is, a statutory corporation established under the Gas Act, 1976. It functions as the State's gas transmission company. It is now becoming increasingly involved in the distribution of one of our natural resources. Transmission means moving gas from large diameter pipes at high pressure and distribution means moving gas through smaller pipes at a much lower pressure to supply customers. Many people have been serviced by this procedure, including natural industries operating between Dublin and Cork. I am delighted the Tánaiste confirmed recently the extension of natural gas into my own town of Clonmel after lengthy discussions with the corporation.

Mrs. Honan

No seat, Senator, no seat.

Mr. Ferris

I cannot pinch the Senator's seat. It is an important development for an inland constituency like south Tipperary, I am delighted that the public ownership concept between the corporation and Bord Gáis Éireann has been protected. The same formula has been found for Kilkenny and Limerick city. The Tánaiste is to be commended for his handling of this important commodity. There has been controversy about Dublin gas. I always smile with amazement when I hear talk about Dublin gas, because it is Cork gas in Dublin. The Minister dealt adequately with the controversy which has arisen in another place.

In Clonmel, where we have the formula worked out, Bord Gáis Éireann will have 80 per cent of the shares and the corporation — the elected authority — will have 20 per cent. We hope and expect that this will be a successful undertaking. While the market in Clonmel at present is not large, there is great scope for increasing it because Clonmel and the surrounding district benefited from industrial development. It is one of the fortunate areas which has not suffered the spectre of unemployment to the same extent as other areas. I am sure there are industries there which will convert to natural gas. A major industry in Ardfinnan has already converted to natural gas. Last year they saved £1 million in fuel costs by adapting to natural gas. It is a most efficient and versatile fuel and will be of tremendous benefit to the town of Clonmel and its surrounding district. I compliment the corporation on their foresight in installing a whole new network of pipelines. The fact that they had gone down that road, and made decisions in the earlier part of the eighties made the Tánaiste's job a little easier. It probably put more pressure on him to make a decision but it made the eventual decision easier because the infrastructure was already there.

Similarly, earlier this year the Government agreed to the supply of natural gas to Kilkenny. I am sure my colleague, Senator Lanigan, the leader of the Opposition, welcomes that because he had always advocated the extension of the natural gas line to his own city. In that case Bord Gáis Éireann will be the full owners of the distribution sector. Work on this project is proceeding apace and like Clonmel, the people of Kilkenny will have natural gas next year.

There are other recommendations in this report to which the Tánaiste might refer. Like the chairman, the secretariat and members I was concerned about the attendance of members of the Department to give evidence before the Oireachtas joint committee. It is important for all of us to defend public representatives who sit on Oireachtas joint committees. It is important that the guidelines set down for sending for people to give evidence and information, should be protected. The Tánaiste might refer to pages 53 to 57 of the report which refer to correspondence between the Oireachtas joint committee and the Tánaiste's Department. I hope he will respond to this because those of us who believe in the committee system of the Houses would like to believe that, if an Oireachtas joint committee need information to make a decision before bringing a report to the Houses, the fullest cooperation will be forthcoming from all civil servants in all Departments. That should be included in the guidelines and the terms of reference.

It is an excellent report and I hope the Tánaiste's response to it will be of benefit to Members of the House who have an interest in this economic development of our natural resources. I look forward to a good debate.

Minister for Energy (Mr. Spring)

Tá mé buíoch go bhfuil seans agam san Seanad inniu páirt a ghlacadh san díospóireacht seo, an Triú Tuarascáil ón gComhchoiste um Chomhlachtaí Stat-Tionscanta Tráchtála — Bord Gáis Éireann. Tá súil agam nach mbeidh na Seanadóirí sa seomra scoile seo ar feadh morán tamaill eile, go rachfaidh siad ar ais go dtí an seomra álainn a bhí ann agus tá súil agam go mbeidh sé in a seomra álainn arís.

I should like to express my appreciation to the members of the joint committee for the work they have put into the preparation of the comprehensive report on Bord Gáis Éireann. I welcome the report as a constructive document and I look forward to hearing the views of the House on it.

Natural gas from the Kinsale Head gas field has been available in Ireland since 1978. We have to recognise that the Kinsale Head gas field is an extremely valuable natural resource, but a wasting resource, and that it is vital for us to utilise it to the maximum national advantage. This involves achieving the appropriate balance between allocation, depletion and pricing. It is not only for the benefit of those fortunate enough to be near the pipeline but for the benefit of the whole nation.

BGE are the statutory corporation entrusted with the task of buying this gas from Marathon and selling it on to its customers, subject to the conditions and obligations laid down by the Gas Act, 1976. It buys gas under contract from Marathon and sells it on under further contracts to its customers. Then, out of moneys generated from this activity it funds its operations and development programmes, and remits a certain dividend each year to the Exchequer.

BGE have been in operation as a statutory corporation since 1976. It originally had two customers — the ESB and NET. Since then their customer base has expanded.

By 1980 the Cork district gas pipeline had been laid, the first branch going to the ESB power station at Aghada and another feeding the NET fertiliser plant at Marino. The line then feeds industries on its way to Cork city and the Ringaskiddy industrial estate. This part of the system was completed during 1980, supplying new gas directly to 27,000 domestic, commercial and industrial customers throughout Cork city. The Cork system provided a basis for a line to Dublin which was considered the main market for gas.

The Town Gas Industry Review Committee concluded that the future of the town gas industry in general hinged largely on the future of Dublin Gas Company which accounted for over 90 per cent of the sales of the industry excluding Cork.

The 220 km Cork-Dublin gas pipeline was one of the biggest engineering projects undertaken in this country in recent years. The pipe was laid in nine months during 1982 so that by the year-end, all the 120,000 customers of New Dublin Gas were connected to gas from the sea off the coast of Cork. Since then, more progress has been made in further extending the natural gas grid throughout the country.

In October 1985 the Government gave approval to BGE to proceed with the construction of a 90 km natural gas trunkline to Limerick. Construction is now almost complete and is on time and within budget so far. It is intended to have natural gas flowing in Limerick city by next spring, with the system being operated by a new company jointly owned by BGE and Limerick Corporation. En route, the dairy co-operative at Mitchelstown, the Golden Vale Co-operative in Charleville and the Ballyclough Co-operative in Mallow are being supplied. The approved estimated cost for the entire Limerick project is £15.6 million. Up to 500 people have been employed during the construction phase.

The Government also gave approval to Bord Gáis in October 1985 to proceed with construction of a natural gas pipeline to serve Waterford. BGE commenced construction of the new 48km trunkline in June 1986 and work on the mainline to Waterford city is expected to be completed in March 1987. Contracts for the supply of gas have been agreed with a number of major industrial companies in the country. Two days ago I had the pleasure of switching on the gas for Waterford Crystal which is being supplied through a 4 km spur from the main Waterford line. Overall, some 300 workers have been employed on the mainline project during the construction period. The total cost of the project is estimated at just over £8 million, over 70 per cent of which will be spent on Irish goods and services.

In June 1986 the Government gave approval for the construction of a pipeline to supply Kilkenny with natural gas. The contract was allocated on 15 October 1986 and construction work has now commenced on the spur line to the city. BGE will control the distribution of gas in the city.

In July 1986 approval was given to provide a supply of natural gas to Clonmel. Construction is due to commence in January 1987 and is expected to be completed in April 1987. The system will be owned 80 per cent by BGE and 20 per cent by Clonmel Corporation.

The committee has recommended that BGE explore the feasibility of providing some of its highly qualified expertise to the gas utilities. I am glad to say that this expertise is already being provided in the case of Cork and Limerick and will be extended in due course to Kilkenny, Clonmel and Waterford.

Natural gas is a very pure fuel and this brings major benefits to the users of natural gas on a domestic, commercial and industrial scale. On the industrial scale, the capital costs and operating costs needed to provide energy in the industry are considerably reduced through the use of gas. Sales of natural gas for use by NET for fertilisers and the ESB for electricity have grown rapidly since 1980. Up to the end of 1985 natural gas supplied over half of the ESB's fuel requirements. However, with the coming on line of the 900MW Moneypoint coal-fired station in the Shannon Estuary, the ESB's need for gas is rapidly diminishing.

There seems to be a view around that we do not have enough customers for gas. Nothing could be further from the truth. Because ESB usage is dropping does not mean that we now have huge amounts of supplies of gas to sell. The ESB's quantity was upfronted in order to get them over the situation where coal units were under construction.

The joint committee drew various conclusions and made certain recommendations in relation to BGE. I would like briefly to comment on some of these. The joint committee has drawn attention to the need for BGE and the ESB to jointly quantify the volumes of gas likely to be required for power generation after 1989. This is all the more necessary following the Supreme Court ruling in the dispute between BGE and Marathon over the interpretation of the supply agreement clauses relating to price and quality, the effect of which was to place a limit on the annual contract quantity. I am informed by BGE that direct negotiations are taking place between the two companies to reach agreement on the quantity to be allocated for power generation in the future. However, future gas supplies to the ESB are contingent on the outcome of a number of factors such as the limitation on gas quantities, and trends in oil prices.

The issue of implicit subsidies was dealt with in another recommendation, implying that the ESB and NET are subsidised through cheap gas. We have as a matter of policy to determine the best usage of our gas resource and its usage for the production of fertiliser can be judged from the relativities of fertiliser and oil prices taking account of the jobs and economic activity stimulated as a result of the manufacture of the fertilisers. The use of gas to make fertilisers is quite a complex issue.

The first recommendation talks about giving BGE greater flexibility in its pricing policy for individual industrial customers. Flexibility here presumably means lower prices. Gas has an opportunity value which means we see its main use in the replacement of oil imports. Gas is not in competition with coal, or turf for that matter. It is in competition with oil. It is priced competitively with oil, and BGE have been issued with pricing guidelines in accordance with the Gas Act. They have flexibility within these guidelines. One must not lose sight of the capital costs involved to bring gas to any new customer — the price charged has to ensure that the supply project is viable. Gas cannot be seen as a vehicle for subsidising industry. In regard to the committee's recommendation that a review of the Gas Act, 1976, be undertaken, I have to say that the gas industry is controlled by complex old legislation, with Acts dating from the last century. The position is being examined in my Department at present to see what needs to be consolidated.

For the town gas companies in Cork, Dublin and elsewhere to adapt to natural gas has not been easy. A case in point is that of Cork Gas which spent major sums of money on conversion to natural gas and was then beset by a number of problems from within and without. In June 1985, the Government decided to allow BGE to acquire a 100 per cent share holding in Cork Gas Company. The purpose of this decision was to enable BGE as the supplier of gas to Cork Gas to control the company, improve its management and restore it to a viable state. The company is now being operated as a wholly owned BGE subsidiary and is managed within policy guidelines by a separate board with its own chairman and executive.

Similar problems have beset Dublin Gas leading to the appointment of a receiver to bring it back to viability. When the Government decided to build the pipeline to Dublin it did so as part of a natural energy policy and strategy. It did so because natural gas is a premium fuel and should be used primarily for cooking, home and other heating, for special industrial uses and after that for general industrial use. Dublin is the largest premium market. The key issues faced at the outset were the cost of building the pipeline to Dublin; the cost and feasibility of converting Dublin to natural gas; the extent of the potential market for gas in Dublin and the investment needed to capture the market.

The pipeline was completed in 1982 and the conversion of the city was completed in September 1986 on time and under budget. However, the main aim of developing the premium market was not achieved to the extent necessary nor within the timescale envisaged originally. Dublin Gas Company was not viable. The company could not meet all its obligations or service its debt. It failed to meet even its own revised marketing targets, could not provide its customers with the quality of service needed and did not make any significant in-roads into reducing its heavy burden of overheads.

I am glad to say that since the appointment of the receiver, considerable progress has been made in laying the basis for an efficient and viable natural gas distribution operation in Dublin. The receiver has assessed the overall situation in the Dublin Gas Company and a major rationalisation of the company is in the course of completion. With the completion of the conversion programme, Dublin now has a modern gas distribution network. I am considering the future funding requirements of the operation and my intention is to ensure a well-run and publicly owned gas utility for the people of Dublin.

I welcome the committee's suggestion that BGE should develop further its work on compressed natural gas. Compressed natural gas or CNG is formed by submitting natural gas to high levels of pressure. Unlike liquefied natural gas, CNG is gaseous in form and can be transported under strict safety conditions by bulk tankers. This facilitates access to the customer and as the committee has mentioned in its report, this might be the most suitable method for supplying natural gas to the smaller towns and industrial centres in the event of it not being commercially viable to supply them otherwise. BGE have undertaken a CNG project at the Minch Norton Plant at Athy, County Kildare. The project has been initiated with a view to assessing the feasibility of supplying firms with natural gas using this method. BGE report that there have been no major operational difficulties to date. However, it will be sometime yet before a decision on whether to extend the facility to other customers can be taken.

I agree with the joint committee's recommendation in regard to the laying of the annual reports before the Houses of the Oireachtas not later than six months after the end of each financial year. Unfortunately this year the publication of the report had to await the outcome of the Supreme Court judgment in the Marathon case.

I, as Minister for Energy, through my Department have control of gas policy and responsibility for BGE. The level of control and involvement by the Department is at issue in recommendation number 10. Unlike other State agencies, BGE is very much in its infancy and so is geared at the present time to growth and development both of its infrastructure and its markets. The laying of new pipelines to link customers or towns to natural gas are major undertakings. BGE under the Gas Act, have to receive approval to lay these lines, and it has been my practice to have major investments also approved by Government, on my recommendation. All such proposals put before me by BGE are examined very carefully in my Department prior to submission to Government. Following approval, the implementation of projects is an operational matter for BGE. I have to say, because of the newness of BGE and the natural gas situation, that very many of the issues which arise cannot be classified as operational in the normal sense as they would in a mature undertaking and hence it might appear there is heavy involvement of my Department in the affairs of BGE.

The natural gas resource has conferred many benefits on the nation. It is the Government's concern to ensure that the benefits accrue to the nation as a whole. Last year, natural gas met some 21 per cent of the country's total primary energy demand. This was twice the energy demand satisfied by coal and almost half the demand for imported oil. Natural gas is, therefore, of major strategic and economic importance to the nation. By reducing imports of other fuels, the effect has been to improve the balance of payments by nearly £400 million in 1985. In the same year the use of natural gas resulted in a direct contribution of over £80 million to the Exchequer.

The part which BGE has played in the development of the gas industry has been of major significance. It adapted to the demands made upon it in the early years and built up a fund of skills in the technical, financial and marketing areas of an industry new to this country.

Since then there have been enormous changes in the marketplace which have not helped. Future development of the gas industry will have to be based on prudent planning and I endorse fully the committee's emphasis on planning in its recommendations. I am awaiting at present the company's corporate plan outlining its strategies for the next five years. In conjunction with this, work on the preparation of an energy policy document has commenced in my Department. It is hoped to have this work completed within about six months. These two important steps should be of great assistance to the company in dealing with future problems and I look forward to the time when the Government objective will be achieved in the increased use of natural gas in homes, offices and factories throughout Ireland.

In conclusion I would like to thank the joint committee for providing me with the opportunity to take part in this valuable debate and to have made available to me the views of the House on this major industrial enterprise.

Mr. Fitzsimons

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.

Mr. Howard

A Leas-Chathaoirligh I welcome the opportunity to make a general contribution to this debate this morning. I am not a member of the Joint Committee on Commercial State-Sponsored Bodies who compiled the report. I did not have the opportunity to listen to the various representatives who appeared before the committee and gave their considered views. I have read the report and the minutes of the evidence taken from a number of individuals and organisations who had an interest and involvement in this activity. I listened to the Minister's speech here this morning.

In recent times — and this is by way of a general observation — I have been of the opinion that the Oireachtas should consider the value and effectiveness of the manner in which we deal with and respond to the reports of joint committees. I have been an advocate of the system for a long time. The reports of the joint committees are an important contribution to the welfare of the country and to democracy itself.

I am becoming disillusioned to a degree with the response these reports seem to invoke in the quarters where I feel a response should be invoked. That is not a criticism of this House, Senators have dealt consistently with reports of the joint committees. The performance of this House is not being matched elsewhere. Therefore, we have arrived at a point in time when we should be questioning how seriously and how effectively the State and the Government are responding to the excellent work of the committees and the excellent reports they have produced.

The Minister's response to this report has been a considered one. There has been on his part a willingness to look at the work of the joint committee and to respond to it in a positive manner. While the work of the committee and their report are important, the attention the report receives in the Seanad is equally as important. I hope the response of the Minister to the points raised here will be as thorough and as considerate as it was to the report of the joint committee. The Minister said it might appear that there is a heavy involvement of his Department in the affairs of BGE. He pointed out the extent to which the Department are involved in issuing guidelines to BGE. His Department are presently preparing an energy policy. It is, therefore with the greatest concern that I read in the joint committee's report — and the evidence is there on pages 56, 57 and 58 — that there was considerable difficulty in obtaining co-operation from the Minister's Department. The Minister told us this morning that his Department lay down the guidelines. He also stated very clearly that there is heavy involvement by his Department. That I accept as being right and proper. If that is the case and if a committee established by the Oireachtas find themselves frustrated in arriving at their conclusions or in doing their work, if they are to be confronted by a stonewalling attitude, I expect the Minister to deal comprehensively with that and to clarify it to the satisfaction of the Seanad.

The Minister has dealt quite extensively with the conclusions of the committee. His response was satisfactory and worthwhile. I compliment the committee on the thoroughness of their report and on a job well done. They raised queries as to where we are going in relation to this valuable natural resource in the years ahead. If I am paying compliments it is right that I should also pay one to Bord Gáis Éireann because they are unique in this sense. They are a new semi-State organisation who have turned in a respectable profit almost from the very beginning — not in their first year of operation but in every year since. That brings me to the whole question of the pricing policy which the committee dealt with quite comprehensively in their report and which to some degree has been referred to by the Minister here today.

The Minister said that gas cannot be seen as a vehicle for subsidising industry. It depends on how you look at it. If the view that gas cannot be seen as a vehicle for subsidising industry was applied rigidly, we would be entitled to ask: how would you describe what the committee have discovered as a hidden subsidy of £36 million a year to NET and £51 million a year to the ESB? They base these calculations on the 1983 accounts of Bord Gáis Éireann. It is a question of what words mean. If gas cannot be seen as subsidising industry fair enough, but how do you describe what we are doing where the ESB and NET are concerned?

There is another aspect of the matter we should also take into consideration. There is a general acceptance — I do not think the Minister or anybody else will dispute this — that the cost of energy has been a barrier to the attraction and establishment of more industries in the State. As far as energy and communications are concerned, we are certainly at a disadvantage in relation to other countries within the EC and outside it. If we were to use the available resources of natural gas to bring our energy costs more into line with average cost in European countries, would that be subsidising industry or would it be eliminating a barrier to the creation of industrial jobs?

The point I am making was made far more effectively by Mr. Liam Connellan, Director General of the Confederation of Irish Industry, in the course of his discussion with the joint committee on 5 June 1985, where he stated that the last report published by Bord Gáis was in 1983. At that time Bord Gáis were able to transmit £65 million to the Exchequer at a profit of 9p a therm. The cost of the gas was about 13p a therm. Apparently that would be the price that then appeared that Bord Gáis were paying to Marathon and the selling price was 22p.

That 22p would appear to be the price it was sold at to the ESB and to NET. Mr. Connellan gave one example of a heavy industrial user who would have a requirement of 400,000 therms per annum at a value of £1.25 million. The price quoted was 51p per therm as against the 22p charged to the ESB and to NET. He also pointed out that there were other cases where prices of 49p and 50p had been quoted. He then referred to the fact that the average price in Great Britain and in France seemed to be somewhere in the region of 35p.

In that situation, he pointed out, that were natural gas made available at the prevailing prices in Britain and France, it would be made available at a level considerably higher than that at which it was available to the ESB and to NET. Mr. Connellan pointed out that that would represent more than a doubling of the profit to Bord Gáis and that it would be also making a valuable source of energy available to industry at precisely the same level as it was available to industry in the United Kingdom and France. Therefore, I feel that Mr. Connellan has made a case which should be answered. I want to revert to what I said earlier. It is recognised, and I do not think there is any dispute about it, that industrial costs in Ireland, particularly where energy and communications are concerned, are putting this island at a disadvantage in comparison with other European countries. We have the opportunity to utilise a natural resource but we must put energy costs at least on level terms with competing economies. We can do that and still double the level of profit that we obtain from the ESB and NET. Mr. Connellan in his submission has made a point in that regard which requires consideration and requires to be answered.

The Minister in the course of his speech said that because natural gas is a premium fuel it should be used primarily for cooking, home and other heating, for special industrial uses and after that for general industrial use. I know, as indeed I am sure everybody concerned with the situation knows, that it has been stated over the years that the generation of electricity by the use of natural gas was one of the most uneconomic methods by which natural gas could be utilised. People went so far as to describe this use as being wasteful of a natural resource. We are conscious also of the fact that with the coming on stream of the Monypoint coal burning generating station the ESB's requirement of natural gas for generating purposes will be considerably reduced.

I notice also that the committee produced on page 39 of their report a very useful graph to indicate the generating of electricity and the fuels used to do that over the period from 1980-84. We have seen a fantastic growth in the volume of electricity generated from natural gas, rising from 11 per cent in 1980 to 54 per cent in 1984. I understand that that trend will be reversed once the Moneypoint coal burning station goes ahead. Therefore what has been generally accepted as a wasteful use of natural gas will be eliminated.

I welcome the expansion of the grid that has taken place since 1980 to provide natural gas to a number of towns and cities. As the Minister outlined prior to that Bord Gáis were simply supplying the ESB and NET. Cork came on stream in 1980, Dublin in 1982 and in 1985 work began on the extension of pipelines and so on to Limerick. Naturally enough you and I, a Leas-Chathaoirligh, expect these pipelines to extend at least up to Shannon.

Mrs. Honan

When Fianna Fáil are returned to power.

Mr. Howard

If you look at the progress of the past four years, there is no doubt that this is a natural progression with the present Government in charge of the situation. We expect to see the pipeline crossing the Shannon and we are satisfied that there are industrial and domestic users of a satisfactory number in the Shannon and mid-Clare area to effectively utilise this natural resource.

I wish to comment on that part of the Minister's speech where he emphasises the value of this natural resource to the economy. He stated:

Last year, natural gas met some 21 per cent of the country's total primary energy demand. This was twice the energy demand satisfied by coal and almost half the demand for imported oil. Natural gas is, therefore, of major strategic and economic importance to the nation. By reducing imports of other fuels, the effect has been to improve the balance of payments by £400 million in 1985. In the same year the use of natural gas resulted in a direct contribution of over £80 million to the Exchequer.

I am sure it resulted also in at least a similar sum as a subsidy, and that is how I still describe it, to both NET and the ESB.

As I tried to point out earlier I am not complaining about that situation. You cannot on the one hand say, no, we cannot use it as a subsidy to industry when we are using it as a subsidy to the ESB and to NET. My problem is the understanding of the word "subsidy" in this context. I do not think you are subsidising anything if you are simply making energy available at a price structure which corresponds to that which competing economies have natural gas available to them.

The report, as the Minister pointed out, was delayed in its publication because of the Supreme Court case between Bord Gáis Éireann and Marathon. Much of the work referred to in the report had been completed for quite some time. When he is replying, the Minister might well like to comment on suggestions and reports that we are not going to be depending solely on Kinsale for supplies of gas in the future. There are indications and reports that other worthwhile discoveries have been made in recent times. The Minister should comment on these reports and to what extent they are speculation or are of value.

Somebody, in the course of the debate in the committee, said it is hard to imagine there will be no more natural gas finds in the next decade, if the conditions exist which would make it attractive to drill exploration wells. We have had indications since the report was printed and published of other discoveries. It would be useful if the Minister were to comment on these and, if possible, quantify them. Not everybody would be interested but nonetheless he could comment on the accuracy or otherwise of the reports.

I conclude by again expressing my appreciation of the work the committee put into this, of the many stimulating thoughts that can emerge from it and the detailed examination they gave to so many aspects of the field. I would always regard it as a very regrettable situation if the work which these Oireachtas joint committees are putting into so many aspects of the functioning of the State was not treated with the seriousness they deserve and if there was not a response to their findings or their work from the quarters where it mattered most. I believe the Minister's speech today was a reasonable response to the work of that joint committee in relation to this report but while it was a reasonable response, one or two areas require further clarification. I hope that in his speech at the end of the discussion here today the Minister will be able to clarify these areas.

Mr. Harte

I should like to begin by congratulating the committee on the report. I must also congratulate Bord Gáis Éireann for the very steady and effective gas deliveries to the various locations. I welcome the developments in the area of supply contracts and the agreements which were reached to bring natural gas to places such as Limerick and so on.

On examination you have to admit that their role in trading is good. It has substantially assisted the balance of payments position. In the matter of imports — which leads to the balance of payments situation — it played a very substantial role in 1985. It is not possible to assess the position this year as yet. We should not overlook this. We should pay attention to it because we are talking about a very substantial amount of money becoming available to assist the balance of payments, by curtailing the necessity for imports.

Unfortunately the board have had their problems. Bord Gáis Éireann were involved with the Cork project which was not disastrous in the general sense but they had to give some assistance. There was also a very big problem with the Dublin Gas Company and they are having problems in their trading arrangement with the ESB. These are things which could happen to any industry, private or public. It does not take away from the overall performance of the board and that is recognised in the committee's report. We should put on record that we are pleased with this relatively new body, who are progressing along the right lines.

One of the problems with Bord Gáis Éireann — as with any other State enterprise — is the attitude of Governments down through the years. Their attitude has been one of tolerance, not pushing them ahead and allowing them to develop in their natural way. This is a pity when you study the whole question of the employment content and the assistance given to the economy, going back to the time of the Shannon when public enterprise was opposed at that time. You can link that with employment. Look at the performances of some of the public enterprises: at the moment you have six public enterprises in the top ten. That is a good league to be in. In the 21 State-sponsored bodies which are public enterprises 80,000 people are employed. That is a very substantial number and we should be very careful when we are dealing with bodies such as Bord Gáis Éireann to see that they get every assistance possible. Where there are defects or flaws these should be pursued and that is where the Joint Committee on State-Sponsored Bodies come in. I welcome that. About £6.5 billion in capital is used in State enterprises and there is a turnover of about £3.9 billion. These are very substantial figures particulary in a small economy such as ours. Public enterprises have made an enormous contribution to the development of the Irish economy and to the lives of the people generally.

There have been difficulties in the public sector regarding the worker — management situation. It showed up as a hostile attitude in many cases. On the other hand, those who are attacking public enterprise such as the special interest groups, farming, banking, industry and commerce, are living off very substantial grants, aids and incentives. They are up and then down; they get substantial payments to assist them so that they can compete internationally. A kind of slanging match goes on with these special interest groups who are always having a go at the public enterprises. Even the biggest Irish private sector firms get many hand-outs. One would begin to wonder if there is any such thing as a private company seeing how much assistance they get. They are involved in naturally sheltered activities just as much as the public enterprises. There must be a dialogue on the whole question of the function of public enterprises. When you set up a body such as Bord Gáis Éireann you should see that they are not "knocked" by people having a special interest. Where they propose initiatives these should be considered, not in the context that there might be a loss situation but in the context of how good the service is in providing for the nation as a whole.

There are many people who would like to rewrite the history of the Irish public enterprises. I should like to see a revitalisation of existing Irish enterprises, not only in the public sector but also in the private sector and an end to the ideological argument about public enterprise. This country cannot survive without having a mixed economy. The way to assist that is to give a little but more freedom and autonomy instead of the day to day Government interference that normally exists side-by-side with the running of public enterprises.

Bord Gáis Éireann are doing very well at present but the moment they make some sort of a mistake, we will have people from the private side being very critical. Anybody who supports public enterprise would not object to seeking major reforms in relation to those public enterprises. Everybody wants to see them become more efficient and dynamic. People have worked to build them up from the very bottom on behalf of the public and there would be great resentment naturally towards people wanting to take over the profitable sides while leaving the loss sectors lying there.

I should like to say for the benefit of Bord Gáis Éireann that they are going to be in the same position as everybody else. There is a need for a critical look at the public enterprises and they need to take a critical look at themselves. They will have to acknowledge their own shortcomings as well as their achievements. They will have to identify their strengths and their weaknesses and they will also have to look to opportunities lost and renew their efforts where they did not fulfil their tasks as well as they should.

With regard to workers and the problems in the Dublin Gas Company, I should like to say it is always a very sad occasion when workers are faced with the fact that they have to be laid off. Naturally, it builds up emotion and hostility when you have been working for 20 years or 30 years and suddenly you are called to a halt by the deeds of somebody else and you are not directly responsible for them. It is a harrowing experience. Workers should not be afraid of change. I do not think they are afraid of change; what they are afraid of is being put out of existence as workers. This is what all the cries are about from people with a vested interest. We have heard quotes from them about public enterprise but none of them examined the 21 public enterprises to see how they are doing and the contribution they are making to the nation.

The private sector are always complaining about the amount of money that goes into public enterprise to keep it going but they should consider the grant incentives, the rescue operations, the reequipment grants and modernisation grants for machinery. You can actually get a grant to put people out of work in private enterprise. If some big company like Guinness come in and get a grant to help them towards keeping the export trade going well, they introduce this new plant. The result is permanent jobs are gone forever because they have to lay off people when new technology is introduced and the work can be done by push button. Companies like that have been very good employers and have been very honourable people in dealing with their employees. They are in the private enterprise system where if you run into this kind of situation you are given grants which ultimately will lead to the elimination of jobs. I cannot see any difference between public enterprise getting the assistance and help that is actually doled out to private enterprise who usually end up in liquidation after a history of start-ups, close downs, redundancies and so on. The people who built up the public enterprise had to start from the bottom and work their way up, whereas many private enterprises get assistance before they get off the ground.

Senator Howard mentioned the question of hidden subsidies, the whole question of industries being subsidised through their energy supplies being subsidised for example, the gas supplied to them. I would not have any objection to that if I thought it was going to help the economy. What happens about the cry of private enterprises to take over places that are doing well? If these ever became private enterprises, would they expect the same thing? Would one expect private enterprise to get the gas at a subsidised price? I would not object to such a subsidy provided everybody understood it was going to be an extra burden on the taxpayer and that when the reports came out and showed a loss as a result of the subsidy in the performance of An Bord Gáis we would not begin to complain that public enterprise was not working. On condition that everybody understands that if you start subsidising energy to industries you also have to recognise the burden placed on the taxpayer and on the particular public enterprise that was giving this subsidised energy, I would not oppose such a subsidy.

I believe the report is the best the committee could come out with and they were able to come out with a good report because the performance of the Irish gas board was good. They are a relatively new enterprise and, as a consequence, they are still going through their growing pains. I trust that over the years they will be given the chance to develop. I am all for continuing to monitor the activities of public enterprises through joint committees. It is a bulwark in defence of the public enterprise to examine it on a regular basis.

The other bulwark in the private area will have to be in the context of the whole question of company law. The State will have to get its protection somewhere in that, although it may not be possible to write it in. There will have to be a review of the rights of the community with regard to private enterprises.

An Leas-Chathaoirleach

I understand the Minister will be replying. Will the Leader of the House indicate to me what it is proposed to do now?

Mr. Ferris

If Senator Harte is the last Senator offering in this debate I propose a sos to allow the Minister to return to respond if he so wishes and if not we will move on to No. 2.

Minister for Energy (Mr. Spring)

First, as I said in my own contribution earlier, I welcome the opportunity of having this motion before the Seanad. It has been an invaluable opportunity because at various times over the years there has been limited time for discussing either energy policy or the development of Bord Gáis Éireann, or in fact the operational responsibilities of the board. This is worthwhile because energy policy is obviously a major policy area for any Government and indeed for any country and even though there has been a great deal of uncertainty since the mid-seventies in particular in relation to energy sources and energy pricing the situation is somewhat more stable at present. It is important of course, from a strictly energy policy point of view, that we are prepared to take the swings and round-abouts in relation to pricing which may happen at any time. There is a great deal of unpredictability and uncertainty in energy pricing because of our reliance on the Middle East and the OPEC countries for oil supply but we should feel very proud of the steps we have taken since the seventies to switch from the use of oil as our main fuel.

Various points were raised and I welcome the Senators' contributions. Senator Fitzsimons mentioned "take or pay" as a possible basis for the distribution of gas. There is, of course, a quantity of gas which has a "take or pay" condition and if an undertaking is given in any one year then the gas can be taken in the following year. The price in the following year is not necessarily dearer than at present but there is a very complex pricing formula which is related to the price of oil and the dollar exchange rate at a given time and there are in-built flexibilities and variables in that formula which can be invoked on an ongoing basis.

On the question of compression, the compression needs mentioned are of course for the Marathon offshore operation and BGE are at present working on a compressor station to sustain supplies into the Dublin region. It is obviously a matter of judgment from the point of view of Bord Gáis Éireann as to their compression needs in the pipeline and decisions have been taken in the last couple of months to build a compressor station and work is ongoing to ensure that adequate and sufficient volumes of gas are available to service the Dublin city demands.

The question of comparing oil with coal or other energy sources does not arise because the reality is that if there was no gas available we would be importing oil in its place and there is a straight equation between the import of oil or the usage of gas. The basis of the pricing policy is oil-related because oil would be the substituting energy source.

Regarding flexibility in relation to lowering the price for a limited period, I discussed this in some detail in my earlier contribution. Obviously, pricing guidelines had to be spelled out and those were spelled out in 1983 to Bord Gáis and they are working in that framework. A comment was made in relation to BGE's executives' time wasted travelling to and from Dublin. I have no information in this regard but the head office is in Cork where the gas is brought ashore and neither the Government nor I intend moving the head office from its present location as we feel it is still the operational base for the gas coming on-shore.

I would like to clarify some points on the question of compressed natural gas. It is not the same as bottled gas because bottled gas is a liquified gas and compressed natural gas containers are much stronger. The pressure required is very high and the supply using this method depends on the economics of the operations. Obviously, we are very concerned about the vulnerability of the supply, given that we have only one pipeline. BGE have an emergency plan to take account of difficulties arising under this head and that will basically be an operational matter for them.

Questions have been raised in relation to new terms for offshore exploration. In relation to the impact of this, I am sure the House will be aware that in September we published further clarification of the oil terms and I am satisfied that in the light of the terms which were then published we will see increased activity. We should not for a moment under-estimate the difficulties being experienced in the offshore oil industry, not just in this country but worldwide. There is the temptation in this country to look inward at what is happening in our own offshore situation as opposed to what is happening to the industry worldwide. In this context it is very important that we actually look at what is happening to the major multinational companies. Major rationalisations have taken place; some companies have cut back their staff by thousands of personnel at all ranks from board level to workers on rigs because of the tremendous fall-out that has taken place in that industry in relation to the drop in oil prices. Revenue is obviously away down in those companies and, as in any business involved in long term projections, those companies had major nightmares and headaches in relation to their long term revenue projections because of the decrease in the oil price. Twelve or 18 months ago it would have been a very brave man who would have said in forecasting oil prices that the price would have gone down to as low as $7 or $8 per barrel. Looking at any economic criterion, any economic basis of making forward projections, we can realise when a price is reduced in that scale what it would do to any business. That has created an enormous shake-out in the oil industry worldwide. Notwithstanding that, we made the decision. I said many months ago that I would not be forced to do so because of fluctuations in prices, that we would have to see if prices would stabilise.

We did that. We did our calculations over the summer months and we published the new terms. While the response has been quite muted, I believe from my discussions with the oil companies, with major oil companies in particular, which are of enormous importance to this country, that the new terms were well received. There are firm commitments for next year for three wells. Discussions are ongoing in relation to further clarification of wells. I believe that gas will become of major interest, whereas it has not been of major interest in the past five to ten years of exploration because of the Kinsale Head gas field being in a position to supply our needs. With the depletion of the Kinsale Head field taking place at a very steady rate, I believe gas exploration will take an additional interest in the coming years. The BP company discovered more gas in 1985 in Block 4818 and there is a possibility that they will go back to that particular block for further clarification of the reserves that are available there.

From the point of view of national energy policy and direction of energy policy, it would be of enormous benefit if we were in a position to spell out what reserves we had available and to know that, when the network and the natural gas pipeline grid is in situ we will have a continuity of supply. That is why I see gas exploration taking on a more important role than it has in the past number of years during which time it has been rather subdued.

I certainly hope we will have more economic discoveries offshore. We can be reasonably positive that we will. The obvious importance is to get clarification of the field that showed potential in the Celtic Sea. More work is possible in the near future on that. Of major importance is the fact that we are working in the Department of Energy on an energy policy document. One of the lessons learned from the seventies and early eighties is that there are so many variables and unpredictable aspects to energy policy that we have got to set out options and alternatives to ensure that, from the industry's point of view and from the domestic consumer's point of view, we have an energy policy that will be consistent, that gives us some guarantees on prices and that does not leave us as a nation wide open to dramatic increases in prices which would have enormously bad effects on our balance of payments.

I want to thank Senator Ferris and his colleagues for the time and the opportunity to discuss what I consider to be a very important aspect of energy policy — the whole question of Bórd Gáis Éireann. I commend the committee again on an excellent report. I look forward to working with the Seanad in the future on energy policy.

Question put and agreed to.