Wednesday 24 January 2018

Shannon LNG's €600m gas terminal under threat after levy ruling

Project stalls as US firm loses row over €50m annual fee towards pipelines

How the Shannon LNG terminal would look, based on ‘a typical LNG Terminal’, like the one above and on Lake Charles, Louisiana, in the US
How the Shannon LNG terminal would look, based on ‘a typical LNG Terminal’, like the one above and on Lake Charles, Louisiana, in the US
Sarah McCabe

Sarah McCabe

PLANS for a new €600m liquid gas terminal in Kerry may be abandoned after the courts upheld plans to impose a €50m annual levy on the US backer that wants to enter the Irish gas market.

Yesterday's High Court ruling could have major implications for Ireland's energy market and local jobs.

In the ruling, the court upheld proposals to force Shannon LNG to pay €50m a year towards two interconnecting pipes which transports gas between Ireland and the UK, even though the company will not use them. Shannon LNG wants to import gas into Ireland by boat. The interconnector pipes are primarily used by Bord Gais.

DISPUTE

The dispute over whether or not Shannon LNG and other gas suppliers like Corrib should be forced to pay for these pipes has rumbled on since 2011, when the rules were first proposed by the Commission for Energy Regulation.

It has caused major delays to Shannon LNG's plans for a €600m liquified gas import terminal at a 287-acre site at Ballylongford, in Kerry, where it intends to import gas.

It secured planning permission for this in 2008 but five years later, construction still has yet to begin.

The project was expected to take four years to complete, so even if construction begins tomorrow it would not be up and running until 2017.

Yesterday Bord Gais and the Commission for Energy Regulation both welcomed the decision and called it a victory for consumers. They argue that allowing Shannon LNG to enter the Irish market would strip Bord Gais of the custom it needs to pay for the interconnecting pipes.

They say that this alone would be enough to cause a hike to the overall price of gas for consumers, which can only be offset if Shannon LNG and others contribute to the cost of the pipes.

But Shannon LNG has been highly critical of this approach. "It is easy to understand that dominant state-owned incumbent companies do not like competition," the company has said.

"Competition is recognised as being good for consumers. In the event that the CER implements its proposals, the public good will be outweighed by the protection of the Bord Gais-owned interconnectors from competition . . . Some have suggested competition would increase prices. That suggestion corrupts economic experience and theory. Real competition in the wholesale gas market would put downward pressure on energy prices."

About 95pc of all gas used in Ireland comes from the UK, which Shannon LNG said makes the country's supplies highly vulnerable. "An LNG terminal located in Ireland would substantially increase security and diversity of energy supply and give direct access to competitive gas supplies which are crucial for economic recovery," it said.

SUPPORT

The fate of the company's planned terminal are now unclear. Its accumulated losses totalled €51.7m at the end of last year, an increase of nearly €20m in a year.

A note attached to the company's 2012 accounts show the directors have obtained a letter of support from parent, Hess, "in which it indicated a willingness to support the company for the foreseeable future".

Kerry TD Martin Ferris said the latest setback was "a huge disappointment."

The project, if it goes ahead, would create about 500 temporary construction jobs and 100 permanent positions.

Irish Independent

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