M J Nolan (Carlow-Kilkenny, Fianna Fail)

I welcome the opportunity to speak on the Bill. Deputy Jan O'Sullivan is in the Chair. If some of the energy that was clearly on show in Thomond Park last night in her home city could be tapped into, we might not need to spend so much money on Bord Gáis. The Bill is timely and it is important from Bord Gáis's point of view that it pass all Stages in both Houses of the Oireachtas before the end of the year because it has an ambitious programme of investment over the next five to six years. The Bill will increase the statutory borrowing limit for Bord Gáis Éireann from its existing €1.7 billion to €3 billion. I am glad it does not simply give a carte blanche to BGE. The Minister for Communications, Energy and Natural Resources in consultation with the Minister for Finance will have a serious input into any of the expenditure BGE will embark on. When the Bill passes all Stages it will have the ability to access funds to deliver on its strategic plan to 2012 and beyond.

As we all know Bord Gáis Éireann was established in 1976 and was given a mandate at that stage to develop and maintain a system of supply for natural gas that was both economic and efficient. Given that it was established at the time of the Kinsale gas field find, I was disappointed recently to read a report that only 9% of the gas supplied to domestic customers now comes from Irish gas fields. It is all the more important that we should continue to explore for new gas sources off the west and south coasts in particular. A recent seismic study of our coastline conducted by the Geological Survey of Ireland has indicated that geologically Ireland has the possibility of holding major deepwater reserves of oil and gas, which is encouraging. This is particularly so for blocks off the west coast adjacent to the current find in Shell's Corrib gas field. The study states that the south coast has proven reserves of both oil and gas in the Helvic and the Seven Heads fields. It is good to know those reserves are there. The problem of tapping into them in such deep water will prove difficult for the gas and oil exploration companies.

Representatives of the gas and oil exploration companies recently made a presentation to the Oireachtas Joint Committee on Communications, Energy and Natural Resources. It was very clear that the cost of exploring for gas off our coasts can in some cases be prohibitive. In today's debate some Members suggested that as a sovereign State we are giving too much away to oil and gas exploration companies when they find gas. It is important to remember that when they were exploring for oil and gas in the North Sea, their expectation was that for every three drillings made, they would hit oil in one. The experience in Ireland over the past 20 years has been one hit in 40 or 50 drillings, which would seriously discourage any international oil exploration company from taking a chance on drilling off the Irish coast.

Based on the report from which I have just quoted, reserves do exist. Perhaps as the oil and gas supplies internationally gradually diminish, it will become more economical for companies to consider Ireland as a place worth exploring for those gas and oil reserves. I understand it costs approximately $400,000 to $500,000 a day to bring on these rigs to explore for oil and gas. As time goes on perhaps more interest will be shown in developing Irish gas and oil fields and we can build on the network that has been put in place since 1976. We now have a sophisticated network running through the country. Some 18 counties are served by Bord Gáis. Presumably when funding is put in place and when the time is right the other counties will be in a position to access domestic and industrial gas from Bord Gáis.

Carlow was one of the first towns to benefit from Bord Gáis supply. While the gas line did not come through Carlow, because of the presence of the sugar factory in the town, which would have been a very big energy user, it was found to be economic to run a spur from the main line to service the sugar factory which was one of the biggest users of natural gas during the sugar campaign season which ran from September to January. That spur coming into the town allowed a domestic supply network to be installed and many of the developers who were building housing estates in the town were able to put in a service for those new houses, which has proved very successful. We have been very fortunate in being able to avail of the gas supply when it came on stream in 1976.

From small beginnings when the original borrowing limit for BGE was €25 million, its recent financial report showed that last year it had a turnover of, I believe, €1.2 billion, with significant profits also. This has benefited the Government as a stakeholder. Bord Gáis has more than 600,000 customers. As the network expands into other counties, that customer base will clearly increase. The Sustainable Energy Act 2002 increased the borrowing limit for BGE from €700 million to €1.7 billion, which was a vast increase at the time and catered for most of BGE's expansion and capital investment needs. It now finds that due to the ongoing investment required and the significant cost of capital and labour-intensive investments, that requirement must be increased to €3 billion.

In the past ten years the network has been transformed with the construction of a number of new pipelines. There is one to the west, which goes from Dublin to Galway, and a spur from this goes to Limerick. There is the South-North pipeline which provides a security of supply for Northern Ireland and a gas supply to many of the towns on the way. The Mayo-Galway pipeline will facilitate the delivery of natural gas to a number of towns along that route, which is very helpful to many towns in Galway and Mayo. It will also facilitate transportation of the Corrib gas to the Irish market in due course.

One of the issues indicated to us by a number of international companies is that the supply of a terminal in Mayo for the storage of gas may encourage other international exploration companies to come on board and consider Ireland as an area to explore. Unlike oil, gas must be stored on land and the costs involved are significant. Now we have one company prepared to invest in and supply the terminal, other companies may be able to avail of the facility if gas is found off the west coast.

In announcing its annual results Bord Gáis unveiled details of an ambitious corporate strategy for the company up to 2014. The company published at the time the results for the year ending 31 December 2007, which showed a significant increase in profits. Among the strategic highlights was the entrance into the residential electricity market by the company, which is good because it will provide competition in a sector which had a monopoly until now. Both domestic and commercial customers will welcome that.

The strategy also highlighted the transformation of the company to a full service energy company supplying both gas and electricity. Customers North and South will be given a real competitive choice. The company has a €2 billion investment in existing and new business and has championed energy sustainability by investing in renewable power as part of the electricity generation portfolio. I am glad to see it is being proactive in doing so. It is hoped to extend the customer base to the 1 million mark, establishing Bord Gáis as the leading dual energy supplier on the island of Ireland.

Among the financial year highlights was group turnover, which increased by 10% to €1.215 billion, as in 2006 it was €1.1 billion. There was growth of 29% in profits before tax to €166 million, compared to €129 million in 2006. Gross sales increased by 8% to €763 million, compared to €710 million in 2006. Gas transportation sales increased by 8% to €169 million, a slight increase on the 2006 figure. Electricity sales increased by 18% to €239 million.

The company is set for a period of major growth and development as it establishes itself as a leading energy supplier on the island of Ireland, with plans to double its value and growth in customer base to over 1 million by 2014. While natural gas will remain the key part of Bord Gáis Éireann's business, the company looks forward to developing a diverse portfolio of assets within the Irish energy sector. It is to be welcomed that it is not just a single product company. Of the €2 billion investment earmarked to 2014, €1 billion will be set aside for investment in new business areas, which is also welcome.

In his statement about the corporate outlook, chief executive John Mullen indicated Bord Gáis "is confident of its prospects in the coming years and this confidence emanates from an already exceptionally strong business space and from the roll-out of the company's ambitious corporate strategy, which will benefit shareholders and business alike". That is positive.

Indigenous gas supplies accounted for only 9% of the total gas demand during 2007, a percentage which will decrease in the absence of further landings of gas. This is the reason it is critical for us to encourage, in whatever way we can as a country, international exploration companies in seeking new sources of gas off our coast.

Ireland may not be recognised as a major player in international gas and oil exploration but it is important to acknowledge we have a number of companies, some of which — like Tullow Oil — are very successful. Despite the fact that the company is registered in London, it is seen as one of this country's biggest successes in the oil and gas exploration industry. It has 120 operation licences in over 22 countries. Other companies operate across the globe in a variety of capacities in resources development and exploration. They include Petroceltic, which is in Europe and Africa; PetroNeft, which operates in western Siberia; Dragon Oil, which has offshore fields in central Asia and petrol resources in the Middle East; AMEC in the US, Africa and Asia; and Pan Andean Resources, which operates in South America and the Gulf of Mexico. We have an interest in the oil and gas exploration area and even to encourage them to return to explore off our coast would be helpful.

Bord Gáis Éireann's requirement for an increase in the statutory borrowing limit has been brought about by the continued growth in the scale of its business, which we have seen since the establishment of the company. It will reach its current statutory borrowing limit by 2009, which means we must have this legislation on the Statute Book for it to avail of increased limits for borrowing. Such an increase in the borrowing limit is required to allow Bord Gáis continue to fund its capital expenditure programme over the next five years. This programme includes the ongoing expansion of its core gas business as it develops as a major energy company.

It is essential the Bill is passed by the Houses before they go into recess for Christmas and Bord Gáis Éireann's strategy is to develop as a dual fuel provider in the energy market, bringing about competition in both gas and the electricity sectors. It contributes to security of supply in both and makes a significant contribution to environmental sustainability through investment in renewable and alternative energy projects. It has proven its commitments in that regard, which is welcome.

An increase in the statutory borrowing limit does not give carte blanche to Bord Gáis Éireann to borrow to that limit. The Minister for Communications, Energy and Natural Resources, in consultation with the Minister for Finance, will have a significant input into what it spends the money on and when it does so. The proposed increase being debated in Bord Gáis Éireann's borrowing limit is in line with similar broad increases for other State energy companies.

The last amendment to Bord Gáis Éireann's statutory borrowing was in 2002 when it was increased from €700 million to €1.7 billion. Since then, a number of projects have been completed by Bord Gáis. The construction of a second gas interconnector to secure the supply of natural gas was completed in 2003 at a cost of €300 million. A ring main pipeline from Dublin to Galway to Limerick was completed in 2003 also, at a cost of €400 million. The north west pipeline from Belfast to Derry was completed to serve the ESB-owned power plant located there, which facilitated the later development of a gas distribution network to five towns along the pipeline route. That was completed in the following year, 2004, at a cost of €100 million. These projects demonstrate that Bord Gáis has been proactive in developing its business. I am happy to support the Bill. I hope the success we have seen with Bord Gáis in recent years will continue.

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