Tuesday, 29 November 2011
Since 2002, the regulation of the gas market has been the responsibility of the Commission for Energy Regulation, which is statutorily independent in the performance of its functions. I have no direct statutory function for liquefied natural gas projects, including specific projects like the Shannon LNG project.
I understand that Shannon LNG – a wholly owned subsidiary of the US firm Hess LNG – received full planning permission in 2008 for its proposed merchant development of a liquefied natural gas re-gasification facility near Ballylongford in County Kerry. As a commercial project, the investment decision is a matter wholly for Shannon LNG.
The LNG facility would provide additional security of supply to Ireland as it would bring diversity to Ireland's supply sources and would bring direct connectivity for the first time to the global LNG market. The prospect of such a facility is therefore a potentially positive step for the island of Ireland. Therefore, I strongly welcome the proposal by Shannon LNG to construct an LNG terminal.
I am aware that Shannon LNG, among others in the gas industry, currently has an interest in the outcome of a deliberative process being undertaken by the CER on the regulatory treatment of the gas interconnectors with Great Britain. There has been regular engagement between the CER and Shannon LNG about this matter. I have also met with promoters of the project.
This issue, currently under consideration, is an extremely complex regulatory question, not least given the implications for gas and electricity business and domestic consumers. The regulator's ongoing deliberative process in this regard is at a very advanced stage, with a decision expected to be made in the next two months. The regulator's own process has been delayed, ironically, by the formal complaint made by Shannon LNG to the EU Commission, alleging that the options being considered in the regulator's consultation amount to unlawful State aid.
The importance of LNG for north Kerry and west Limerick cannot be emphasised enough. We are concerned with as many as 450 jobs to start it up. Reports, true or otherwise, have been consistently circulating in the area that Hess LNG is on the brink of pulling out because of the possible €10 million tariff per year to use the national gas pipe network. The regulator has told Shannon LNG that it must pay to use the gas pipeline that connects Ireland to the UK and that will cut costs by €10 million. The parent company, Hess LNG, sees this charge as unsustainable and as a consequence, has been considering its future. The company has invested up to €50 million in the project to date.
The Minister said he expected a decision from the regulator within the next two months. I heard in September that the decision would be in October, yet now we are at the end of November.
Can the Minister give a firmer response? Will it be in two months or in the next few weeks?
I assume the Minister is aware of the unemployment situation in the north Kerry area, which is more than twice the national average. Can he comment on that?
The Deputy is right. I did say that I expected a decision at the end of October or early November, as I was so advised. I believe that is what would have happened were it not for the rather unusual step by the company to lodge a formal complaint with the European Commission against the process underway by the regulator. One can understand the lodging of a complaint against a decision of the regulator but it is unusual to see an action taken against an anticipated decision by the regulator.
This regulatory issue is complex. Under the current regulatory regime the coming on stream of this liquefied natural gas, LNG, project will have implications for gas network tariffs set by the regulator. The same applies to the Corrib field. This, in turn, will have implications for general wholesale gas prices bearing in mind that the model is based on Irish prices following United Kingdom prices plus an additional amount for the price of transport through the interconnectors. In an environment in which gas from the Corrib field and LNG meet some or all of Irish demand, the interconnectors built and owned by Bord Gáis Éireann would become under utilised and their proper remuneration by the reduced number of gas customers becomes an issue. In such circumstances, the prices for the consumer would go up and there would be a windfall gain for the multinationals.
Deputy Ferris is likely to be minded to agree with me that this is not the outcome we seek. We have no wish for prices to be pushed up as a result of a stranded asset, that is, the interconnector, and a windfall profit to the multinationals, much as we welcome them here, whether they are associated with Corrib or LNG. I have met the company and I have met several colleagues who have made representations to me, including Deputy Ferris, the Minister, Deputy Deenihan and Deputy Spring. Others have made representations and I have met members of Kerry County Council and Shannon Development as well. We had a situation whereby we were correct to anticipate a decision at the end of October from the regulator but, ironically, the action of the company has delayed it.
It is important that the whole matter is cleared up because we are hearing different versions from different Ministers. I gather the Minister is aware of this. This should be cleared up because the people who live in the area are depending on this to proceed. As the Minister is aware, I have no love for multinationals and I am keen to ensure value for money for the taxpayers of the country - I subscribe fully to this principle as I have done consistently all my life. Some cohesion is needed from Ministers regarding what is happening here. The truth about what is holding this up should be spelt out for the people of the area. People are not aware of what is going on.
I agree it is important that the matter is cleared up not least from the point of view of the jobs that will be created. It is important from the point of view of the additional security of supply that it would give to our energy provision here as well. For this reason I welcome and support the project and I have made as much clear to the parent company, to the local company in Kerry and to Shannon Development. We are doing everything we can to bring in this plant because LNG would be a valuable addition to our diversity of supply. As Deputy Ferris suggested, the fact that there are many unemployed people in the area is something we will take into consideration and I am keen to help in any way I can. The regulator is set up by statute of this House and is independent and has a job to do in the interests of consumer protection, competition and so on. I cannot interfere with that but I will be helpful in any way I can. I have signalled only recently following a request from my colleague, the Minister, Deputy Deenihan, my willingness to meet the county manager and I am pleased to do so.