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Gas Prices.

Dáil Éireann Debate, Wednesday - 12 May 2004

Wednesday, 12 May 2004

Questions (33)

Trevor Sargent

Question:

50 Mr. Sargent asked the Minister for Communications, Marine and Natural Resources the assumptions his Department is making on the likely price of gas in five, ten or 15 years’ time; and if his attention has been drawn to the increasing body of international evidence showing that gas prices are likely to become highly volatile within that time frame. [13693/04]

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Written answers

I take it that the question relates to the international market price of gas. As a small peripheral market we are price takers and thus very interested in price evolution.

Gas prices have tracked oil prices over recent years and are generally expected to do so into the future but there is some lagging effect. Many gas contracts are explicitly linked to the price of oil.

Future gas prices will also be influenced by the continued effects of production decline in north west Europe, exposure to longer supply lines with somewhat greater risk and high investment requirements, and the trend to gas for power generation because of environmental concerns.

On the Irish market, Bord Gáis Éireann was able to provide low cost gas to the domestic sector from the mid-1990s onwards because of a number of favourable long-term contracts that it entered into in the early 1990s. The first of those contracts came to an end last year and, as a result, prices had to rise. As announced today by the energy regulator, Mr. Tom Reeves, there will be "significant further increases" to the general market price of gas for this sector as the benefit of these long-term contracts is eroded. This is separate from any increases, or indeed decreases, that may arise from changes in the market price of oil, and hence gas.

My Department is aware of some international modelling of future gas price developments which all tend towards gradually increasing prices, but this is far from an exact science and cannot be relied upon at this stage.

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