Mr. Tim Gould:

It is undoubtedly the case that greater interconnection can help one to manage flexibility. One of the reasons offshore wind is very promising in that respect is that by moving further offshore, one has fewer restrictions in terms of turbine size and area covered. One can tap into more consistent wind speeds and generate much higher capacity utilisation than one can for the onshore counterpart. One could reach perhaps up to 60% utilisation for that offshore wind resource compared with a lower figure for the onshore. That helps with some of the intermittency issues but still, when one is looking to cover the winter heating load of a country like Ireland, it is difficult and in our view would be expensive to try to manage that entirely through, in a sense, the all-electric route. That would require the building of a large amount of additional electricity generation and transmission capacity to cover that eventuality.

In our view there is a role in this discussion also for molecules. One can debate what sort of molecules they might be but at least for the interim period that is most likely to be natural gas as a way to provide that security over those periods in the system where other renewable elements are not in a position to do the heavy lifting. Those molecules at the moment are natural gas in many systems, including here, but in the future they could be renewable natural gas. There is a significant biomethane potential in this country, as in some others, and there is also a very interesting discussion about the role of hydrogen in future energy systems. Hydrogen could come from electrolysis, so it could be offshore wind producing electricity that is then turned into hydrogen or it could be through steam reforming of natural gas with carbon capture and storage. There would be ways to also cover that eventuality in the system here in the context of a deeply decarbonising outlook.

I have jumped a number of questions so I would like to come back if I may to the question of shale. I was asked about the break-evens and how high it could go and to compare break-evens with offshore production elsewhere in the world. The break-evens vary widely across different players in the US. There are players that have been proven to operate when the oil price is very low - below $40 a barrel - and there are others, particularly when one moves out of the so-called sweet spots, which would probably need a higher price because the resource quality is less good. How does that compare with offshore production? Offshore costs have come down very significantly in recent years so I do not think it is reasonable to assume that offshore is always at the high end of the cost code. If one looks at some of the new projects in the Gulf of Mexico or some of the Brazilian projects, they have costs that are still attracting significant investment from companies. Many of the new conventional projects that are going ahead at the moment are indeed in that offshore space. Companies are saying that a project which had a $70 break-even a few years ago when it was costed is now coming in at between $30 and $40. Those costs may come up again as activity levels increase but that is at least where we are at the moment. There are high-quality offshore projects going ahead which have relatively low break-evens in terms of where they sit on the global cost curve. What those costs might be at some point in the future in Ireland is impossible to say for the moment. One could make the case that it is one reason to try to find out, but at the moment there is not enough information to form an opinion on that.

The Deputy made an important point on the consequences of a sustainable development scenario for the composition of the demand barrel because in practice the demand would shift towards lighter products, particularly where some liquid petroleum gas, LPG, is needed in some rural areas to enable clean cooking for those still cooking with solid biomass, and for the role of petrochemicals. The lighter end of the barrel will become more prominent in global demand and there is a hole in the middle where gasoline and diesel start to become less important because of changes in the transportation sector. Demand for the heavier product would become scarce. That is an unprecedented challenge for the refining industry if the changes take place. It has coped with changes of a similar order in the past but they would be a significant shift in what the refining industry is asked to do in the future.

There were a couple of questions about why our analysis is different from the analysis of Oil Change International. I have read some of its work but I do not have it in my mind so I would not be in a position to comment in detail on the analysis it has produced. We start from the Paris Agreement and we consider what it would mean for the global energy system so we work backwards from a point in the future which we believe would be consistent with the Paris Agreement. That gives us the sorts of results the committee has seen in our scenarios. That also gives us oil and gas demand trajectories that we relate to a detailed resource model that considers production curves and decline rates in detail. That is how we end up with the conclusion that to satisfy that demand some oil and gas projects need to go ahead. One point I would like to emphasise and which was not clear in my earlier presentation is that in the sustainable development scenario we are not talking about an increase in oil and gas investment in respect of today; we are talking about a gradual decline in the importance of that investment to the energy system in the context of a fundamental shift in those investment dollars or euro or whatever they are towards clean energy technologies and energy efficiency.

Why in a fungible oil and gas market would Ireland need its own production? It is not completely obvious, at least in respect of gas, that there is a movement towards a more liquid and competitive gas market in the absence of the ability to import LNG. It is not obvious that Ireland has any direct access to that market and that would also provide a reason to think about developing its own resources for the purposes of meeting domestic demand.