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Seanad Éireann debate -
Wednesday, 4 Jul 1990

Vol. 125 No. 14

Gas Act, 1976, Order, 1990: Motion.

I move:

That Seanad Éireann approves the following Order in draft:

Gas Act, 1976 (Section 9) (Establishment of Subsidiaries) Order, 1990,

copies of which Order in draft were laid before the House on 15th June, 1990.

There is no time limit on speeches. I welcome the Minister to the House.

The purpose of this Order is to confer on Bord Gáis Éireann (BGE) powers, duties, rights and obligations in relation to the establishment of subsidiary companies or joint ventures.

BGE was established under the Gas Act, 1976, with powers and function in relation to the transmission of gas and the development and maintenance of the natural gas supply grid on a commercial basis. The involvement of the board in the gas utilities in Cork, Limerick, Clonmel and Waterford in the eighties and particularly the acquisition by BGE of the assets of the Dublin Gas Company (in receivership) meant that the board's role expanded from being concerned solely with transmission of natural gas to distribution also. New legislation to cater for the changed circumstances was needed and as a result the Gas (Amendment) Act, 1987 and a number of subsequent orders were enacted.

The board has functioned very successfully under its existing legislation to such an extent that natural gas is now the dominant fuel in the industrial sector in areas served by the gas grid. In the domestic sector also, sales are consistently increasing and indeed, 16,000 new central heating customers were connected up in 1989 alone, an increase of 33.3 per cent on the figure for the previous year. The various gas utilities which, prior to the board's intervention, were in very serious financial difficulties have been turned around. Their losses have been arrested and they are now almost in a break-even situation.

The success of BGE has made it imperative that we secure the future of this vital national industry. Our identified indigenous reserves of natural gas are obviously finite and are expected to run out in the next decade. I made it a priority, therefore, since taking office, to examine the options open to us with a view to securing long-term gas supplies. Having examined a number of possibilities, the favoured option is by way of a sub-sea interconnector pipeline to Britain. This option will of course, also allow for export of gas from Ireland, should circumstances allow.

The Government decided that now is the best time to undertake the planning which would be necessary for a project of that scale. A project management group made up of representatives of my Department and BGE was set up. Discussions have been held with a number of British and Continental interests in the matter, and we will shortly make a decision on which supplier or suppliers to contract with for our gas supplies. In the course of our negotiations to date, a number of parties have raised the possibility of a joint venture arrangement in the construction and operation of the proposed pipeline. This is an option which could be worthy of serious consideration if a suitable proposal were to emerge. Accordingly, I am anxious that the way should be cleared now to enable BGE to act in the appropriate way should the occasion arise. It may, for example, be preferable to deal with this eventuality by way of a subsidiary of BGE.

I do not want to interrupt the Minister but the copy of his address is not in the House.

Tuigim go bhfuil sé ar a bhealach. BGE's existing legislation does not address in any clear way the question of the board's entitlement to establish subsidiary companies or enter into joint venture arrangements. In effect, the board already has four subsidiaries in the gas utility companies which it acquired that is Cork, Limerick, Waterford and Clonmel Gas Companies. I feel it is now necessary to remove any doubt there might be regarding BGE's relationship with these companies, to address the question of control and accountability, and to pave the way for any future ventures in which the board may wish to be involved, particularly at this time in connection with the proposed inter-connector project.

Section 9 of the Gas Act, 1976 provides for the making of an order to confer on the board, such functions, in relation to the provision of a supply of gas, as the Minister thinks proper. Functions can include, in this instance, powers and obligations. Such an order must be laid in draft before both Houses of the Oireachtas, and requires their approval before it can be made by me. The making of this order will confer on BGE the power to set up or participate in subsidiaries, and thus to enter into joint venture arrangements. It will qualify this power, however, by imposing conditions under which these functions may be exercised, namely, that my approval, and that of the Minister for Finance, will be required before BGE can embark on such a venture.

Similar provisions to these are included in section 2 of the Electricity (Supply) (Amendment) Act, 1988, and in section 2 of the Turf Development Bill, 1988, for the exercise of similar functions by ESB and Bord na Móna respectively.

I am adopting this procedure because I feel it to be the most appropriate and expedient way of conferring the additional functions I have described on BGE and of ensuring the appropriate control.

I, therefore, commend this motion to the House.

I welcome this motion. I congratulate the Minister on bringing forward the order. I would also like to congratulate Bord Gáis Éireann on the work they have done, on the development that has taken place and on their far-seeing approach to their business. I would like to refer to the foresight of the Government at the time in 1976 in setting up Bord Gáis Éireann. The success of the board proves that that approach was farsighted. Developments have taken place and things have changed over the period; things have certainly changed in the State and semi-State areas. It is necessary that as many as possible of our State and semi-State bodies should operate on a commercially viable basis and be able to survive in the commercial area.

We welcome the expansion that Bord Gáis have made since their foundation in 1976 and we look forward to further expansion in that area. In my own area of Limerick it is now available and we look forward to it being extended throughout the estuarial area to compliment the development the Minister for Industry and Commerce spoke about recently along the estuary from Limerick back as far as Foynes and Glin. Bord Gáis Éireann could play a very important role in making that area very attractive and we look forward to that.

As the Minister has said, natural gas is finite and there is a likelihood that over the next ten years further finds will be made. We support the approach of the Government to establish a sub-sea inter-connector with Britain and the Continent. We are now moving towards 1992 and we must see ourselves in a European context. We must be able to tap into the energy sources available from Europe and we must contribute to those if we have the energy supplies in our own country. We must see ourselves in the context of Europe rather than in an insular context.

We welcome the approach of the Government in setting up a plan and introducing the order to allow Bord Gáis Éireann to properly enter into the various arrangements to ensure that that development can take place. We will also welcome any future developments for Bord Gáis Éireann in entering into other successful areas, joint ventures and other commercial involvements that will require subsidiary companies to operate semi-independently of the board. Only yesterday at a meeting of the Oireachtas Joint Committee on Commercial State-Sponsored Bodies we heard of the successful approach of Bord na Móna to some of its subsidiary activities especially in the horticultural area. These are areas into which we should encourage the entry of State and semi-State boards. We must see State enterprise as being viable in the commercial context, operating successfully in the commercial area and exposed to the commercial pressures and opportunities the open market creates. They will thus be successful in their own right and contribute to the national economy.

I would like to compliment the Minister and assure him of the support of this party for the order.

I would like to congratulate the Minister on bringing this order before the Seanad. It is a very brief order in one sense and yet in another I think it is one of very considerable significance. The use of gas for lighting purposes and as a fuel goes back quite a time; indeed, in this country we were to the forefront during the Victorian era in developing town gas. We have since gone through a period during which gas became — at any rate in this country — a very neglected fuel. Yet, it has enormous potential, enormous advantages, which I will come to in a moment.

An Bord Gáis have done a very good job indeed since they have been established, but it has been very much a domestic operation and limited particularly to the major cities and to the establishment of a gas pipeline from Cork and from the Kinsale Head gas field tapping into that. However, the potential for gas is really quite enormous. In our neighbouring island British Gas is probably one of the most successful of all companies in that country and certainly sees gas as having tremendous opportunity for development. To achieve that, both domestically and internationally, it is necessary that An Bord Gáis should have specific powers to set up subsidiaries and organise their business appropriately. Perhaps that was not thought about very much when it was set up in 1976 but it is certainly becoming very relevant now because there is virtually an international network of natural gas pipelines.

One of the main sources of natural gas for western Europe is certainly from the far east of Siberia and there are continuous gas lines from that. The gas fields of the North Sea are at least as important as the enormous oil fields in the North Sea and there are such huge gas fields as Echo Fisk. Here in the Irish Sea — on the United Kingdom side of it, unfortunately from our point of view — is the magnificent Morcambe Bay gas field. There is very little doubt that other gas fields are likely to be discovered. Indeed, within our own offshore hydrocarbon exploration the one successful discovery so far has indeed been the Kinsale field and there is some likelihood that there will be one or two other fields discovered and that any discoveries in the Celtic Sea area are perhaps as likely to be gas as oil.

The step which has been taken by the Government and the Minister of connecting up to the grid, which is now becoming a total European-Asiatic grid, is of enormous significance for us in that on the one hand it will guarantee supplies of fuel for us, but on the other hand, taking it in a very positive manner, it opens up to us a direct connection with the major gas consuming countries of western Europe. That is an expanding market. There is basically a shortage of energy. Although the price of oil is very low at the moment, nobody has really found any significant new accumulations of oil since the 1970s oil crisis. Yet, there is a steadily increasing demand for energy and that increasing demand can basically be only met from three sources.

One is the use of coal, which is very inefficient and of course environmentally very damaging. Here in Dublin we are getting away from the use of coal. One is by having nuclear power stations and there is a dilemma there indeed. Many environmentalists react immediately and almost automatically against nuclear power stations. Yet, others could argue that, if we wish to protect the environment and avoid too much use of fossil fuels, one of the effective ways of doing so is to extend the number of nuclear power stations.

The one alternative which is very effective is the use of natural gas. We already have one major field — we may perhaps in due course have others — and it should be available for export. In environmental terms it is a very satisfactory substance to use and I will quote some relevant figures. As regards the greenhouse effect, the main cause of it is believed to be the production of nitrogen oxides and this comes mainly from coal and so on. If you use natural gas the proportion of nitrogen oxides is much less. If we compare it with other fossil fuels or other fuels in general, we may say that natural gas is 60 per cent as compared with that caused by coal, or 75 per cent as compared with that caused by oil. It is an enormous saving and could be very important from an environmental point of view. It is a very clean and efficient fuel. We have argued for some time in this country about the use of gas for the production of electricity. It may be of some interest that British Gas in its latest annual report is talking about using gas increasingly for the production of electricity.

Another area, and the establishment of subsidiary companies could be very important here, is to enable An Bord Gáis to follow the path which the ESB and other Irish companies have followed successfully overseas. There is no real reason, with the expertise which we are now building up with An Bord Gáis and the use of natural gas in this country, why that technology and the personnel associated with it should not make a contribution overseas. It is one of the main areas of development of British Gas. In fact, it has divided itself into three major areas of business activity. One is domestic gas in the UK, one is gas exploration and development. Unfortunately, in this country our gas company or others are not involved at all — yet, at any rate — in exploration and development, although under the 1976 Act An Bord Gáis is entitled to be.

The third area of business management for British Gas is what it calls global gas. Effectively, that is exporting expertise by British Gas to companies overseas, to cities overseas that want to bring in gas plants, to industrial companies that wish to use natural gas. I think there could be a major area of opportunity and development here for Irish experts in the gas industry to contribute their technology, teaching and help to many of the countries overseas where gas, and certainly natural gas, is only beginning to be used as a source of energy. It is certainly a source of energy that will be used increasingly in the future and I think the Minister is very much to be congratulated on the brief but crucial order which he has brought before the Seanad today.

As my party's junior spokesperson on Energy I, too, would like to formally welcome this order. In particular I would like to be associated with the Minister's congratulations to Bord Gáis Éireann on their success to date. I note he stated that natural gas is now the dominant fuel in the industrial sector. He also pointed out that in the domestic sector sales are consistently increasing and that 16,000 new central heating customers were connected in 1989 alone, an increase of over 33 per cent. That is to be welcomed.

Senator Conroy mentioned the smog problem in Dublin and in particular the problems caused by the burning of coal for domestic purposes. This huge increase in the consumption of natural gas is to be very much welcomed and Bord Gáis Éireann are to be congratulated on their consistent promotion of their product which benefits us all, particularly in the Dublin area having regard to the smog problem. I would also like to congratulate the Government in general, through the Minister, on the great strides that are being made at last to tackle the smog problem and also to congratulate them on their work in promoting natural gas.

As Senators know, the purpose of this order is to allow Bord Gáis Éireann to establish subsidiary companies and also to get involved in joint venture arrangements. I understand that the specific purpose of this order is to allow Bord Gáis Éireann to get involved in a sub-sea inter-connector pipeline to Britain. That has been outlined by the Minister. I would like to congratulate him and his Department on this imaginative step. It is a fairly simple order and yet it has far-reaching consequences.

As we approach 1992 we are very conscious of the fact that we can become isolated as a country in many respects and none more so that on the question of energy. This is preparing for the future and is also securing our future energy supplies, particularly in relation to gas. It is important that we become tied into the European energy system. As a nuclear-free country we should be very conscious of further entanglements with the energy question in the European context. I know the Minister is very much aware of that issue. It is something about which we will have to be vigilant over the coming years.

I welcome this order. It has far reaching consequences and I congratulate the Minister on bringing it forward to the House.

I, too, want to join with other Members of the House in welcoming this order. I congratulate the Minister, his Department and Bord Gáis on the tremendous work they have done, particularly in this city. Although I am a rural representative, most people in Ireland recognise that it was a major job to make gas safe for users in the city. While there has been inconvenience for the Dublin people, it was very necessary work. That has now been achieved. The use of gas is very important to city dwellers, and we recognise it as an important source of energy and wealth to the nation.

The possibility of piping gas between here and Britain is to be welcomed. I believe that a link pipe is most necessary. When the Cold War was at its height there was a very important gas link between Holland and Europe and the Soviet Union. The world sources of energy have to be looked at in that context. I am pleased, therefore, that Ireland is not going to be isolated.

I represent a part of the country that has no hope or prospect of ever being connected to the national gas grid. The people and the public representatives in the west of Ireland are most concerned about this. While we are pleased about the development of gas and about the gas finds, it is very hard for people in the west of Ireland not to be concerned if they are not compensated in some other way.

Natural gas is a very cheap, clean form of energy. Other speakers have identified its importance for horticulture, for the heating of glasshouses and all of those areas. As a result, the west of Ireland, and particularly my county, are at a serious disadvantage. While on the one hand we totally support and welcome these developments in gas, on the other hand we have to highlight our concerns.

I am aware that when funding was being sought at European level a map was produced showing the proposed gas developments in this country. The map showed the pipleline covering the whole of the south — Clonmel, Waterford, Cork, Kinsale — going on to Dublin and eventually to Belfast. It stopped short of Belfast. This was produced at the EC in support of a case for funding. That map also showed a link to Monaghan, Cavan, Sligo and Donegal. That was the basis of the case put forward to the EC for funding. I am saddened, and so are many other public representatives, that that gas pipeline link is no longer a proposition. It is no longer on the map. Many people in my area have asked; was the map produced only to support the funding application? Was there ever a serious intention to bring a pipeline from Drogheda and Dundalk to Monaghan, Cavan, Sligo and Donegal? Are there alternatives to compensate those disadvantaged areas for the lack of this cheap source of energy or are the benefits of this cheap energy to be confined to the part of the country that is already best off and certainly could not be classified as disadvantaged? These are vital and important questions.

We are supposed to cherish all the children of the nation equally, I would challenge that we cherish all the areas and the regions of the nation equally. If we have an important source of energy I want to see the benefits accruing from it distributed nationally. I do not want to see people who have been disadvantaged for centuries being more disadvantaged by the fact that they cannot benefit from natural gas.

Whether it supports industry or provides home heating, there are many advantages that natural gas brings to a region. I hope that the search for natural gas will continue and that we will have more finds. However, I am concerned at the lack of planning to include part of this island. I strongly support the continuation of negotiations to extend the gas pipeline and the importance of bringing a gas pipeline to Belfast, if it is economically possible. I am mindful of the fact that it has to be economically possible. I hope that when they are planning to extend the grid, first to Britain and automatically to the rest of Europe, that no part of this island will be excluded. That is very important. I urge the Minister not to form the impression that the people in the west of Ireland, in areas such as Sligo, Cavan, Monaghan and Donegal, are unaware of the potential of having natural gas. We are very much aware of it and our interest in it will not disappear. If there are proposals for further funding from the EC, we will continue to highlight the fact that the benefits of natural gas are not being extended to the people in the west of Ireland. It would be negligent of me if I were not to make that point.

While I am pleased at the reorganisation of the Bord Gáis Éireann, I am one of a number of people who will continue to express our concern. I hope the Minister responds to the points I raised and that he will provide today some hope for those who are concerned that they are being left out of this very important development.

I would like to make a few brief comments and to welcome the order. It is important. Natural gas is a vital source of fuel in our economy at present. We have other sources of fuel — peat, coal and oil but natural gas is definitely the cleanest fuel of the lot. Great progress has been made in its development since Bord Gáis was established. The Kinsale Head gas field is a tremendous boost to our economy and to our fuel system. Gas can be supplied for domestic use, industrial use and many other functions.

The purpose of this order is to enable Bord Gáis Éireann to lend money, upon such terms and conditions as it may determine, to a subsidiary company, to guarantee, in such form and manner and on such terms and conditions as it thinks fit, the due payment by a company of the principle of any moneys, including moneys in a currency other than the currency of the State, borrowed by the company, or the payment of interest in such moneys or both the repayment of the principle and the payment of interest on any such guarantee, which may include a guarantee of payment of incidental expenses arising in connection with such borrowings and may be a guarantee of payment of a promissory note made by the company or a bill of exchange drawn by or accepted by the company.

It is important that this condition be in the order to ensure that subsidiary companies, which are doing great work in their respective areas, are adequately financed. The Cork Gas Company deals with the distribution of gas. There is also the Limerick Gas Company, the Clonmel Gas Company, the City of Waterford Gas Company and Natural Gas Finance Limited. I agree with Senator McGowan that it is important that the gas pipe line from the Kinsale Head gas field be extended to Cork, Mitchelstown and then on to Limerick and then from Waterford and Dublin to Dundalk. At the time of the construction of this gas pipe line, many farmers were disappointed that it was going through some of their land, but I am sure when they see the benefit of that they will realise it is a worthwhile project.

On the map I have in front of me there is a big void in the midlands and the west back to the Minister's own area of Galway and onto the Sligo-Leitrim areas. The gas pipeline should be extended to those areas. Gas is an important source of fuel and as we have native gas every effort should be made to utilise it to its full. I welcome the order.

First, I would like to say how pleased I am at the welcome given by parties on all sides here to his order. I am also pleased the Senators fully recognise the significance of what we are doing here today and the opportunity that will obviously open up for the Irish consumer, for Irish industry, upon completion and commissioning of this pipeline which will give us access to the European gas grid and in that way guarantee security of supplies at the European prices and eliminate any possible inequalities in energy costs which might otherwise arise. It is a very significant measure by the Government to commit themselves to the construction of a gas pipeline connecting Ireland to Britain. We know that Britain will be connected to the European network.

In the EC Energy Council, working in preparation for the establisment of the Internal Market by 1992, significant proposals are on the table to guarantee rights of transit through number countries' networks for gas pipelines and electricity grids. At the recent Energy Council meeting on 21 May, the directive on electricity transit has been adopted, which is a very significant step, I believe it is only a matter of time until a similar gas transit directive will also be passed which would guarantee access to the European-wide gas network.

Gas is a very clean fuel in comparison with the other fuels in general use in this country. The Government have made a major commitment to gas because of the environmental considerations. Our own reserves, as I have indicated, are finite. It is prudent of us to plan now for continuity of supply into the future in order to give the assurance to those who are major gas customers at present that there will continue to be a supply of gas even in the event of failure to find additional reserves in the Irish offshore. However, the existing gas fields are expected to last another decade. We have that window space within which to make these arrangements, and that is why we are proceeding now with the proposals we are discussing today.

Before I conclude, I would like to inform the Seanad that the European Commission recently announced a funding package — the Regen Initiative — under which 300 million ECUs will be made available for energy networks projects in several countries, including the proposed natural gas inter-connector pipeline between Ireland and the United Kingdom. The level of aid for particular projects has not been set, but the amount allocated for the programme gives cause for optimism here that ample funds will be available for the Ireland-UK project.

The cost of the proposed inter-connector, including compression facilities, is estimated at between £100 million and £200 million. That will depend on the route and the pipe sizes that are finally chosen. Four possibly supply routes are under investigation at present. One is Barrow in Furness to North County Dublin, the second is Blackpool and Barnes to North County Dublin, the third is Anglesea in North Wales to North County Dublin and the fourth route is also under consideration now, that is, a possible route from southern Scotland to North County Dublin. This fourth route has arisen because of the great interest being shown by the Northern Ireland authorities in a possible extension from this pipeline to bring gas supplies into the Six Counties. However, the final choice of route will depend on the choice of supplier, the terms of the supply agreement and the attitude of British Gas, through whose network gas for Ireland will be transported across the United Kingdom. A sub-sea survey will be required before a decision on the technical feasibility of each route is taken. These surveys will commence in July this year. In the meantime, negotiations are proceeding with prospective suppliers with a view to choosing one or an appropriate combination for a supply contract.

Senator McGowan and other Senators have referred to possible extensions to the national gas grid in this country and I am pleased the Senator said "provided it is economically viable". An Bord Gáis will be pleased at all times to consider extensions of the gas pipeline where it is seen to be economically viable for them to do so.

The previous proposals included the laying of a pipeline not just from the Kinsale Gas Head to Dublin but a continuation of that pipeline to Dundalk. At that time it was intended it would be continued across the Border to give a supply to the Six Counties. That project did not proceed. Now that we have renewed interest on the part of the Six Counties authorities there is a possibility that a supply to the Six Counties would be by way of an extension of the pipeline from Dundalk to the Six Counties area.

I thank Senators for their welcome for this project and this order.

Question put and agreed to.
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