Gas refinery under threat as suppliers reject charges
TALKS will start next month to resolve a row about multimillion-euro charges imposed on energy suppliers, which have been blamed for jeopardising a planned gas refinery in Kerry.
The row centres on the Commission for Energy Regulation's (CER) ruling that gas providers should pay for the rising costs of two interconnectors linking Britain's and Ireland's gas supplies.
One firm, Shannon LNG, has said it won't be using the interconnector and shouldn't have to pay for it. The company, which is backed by the global corporation Hess LNG, plans to ship liquified gas by sea to Tarbert, where it will be processed for the domestic market in a €600m plant.
The project -- which will generate upwards of 650 jobs -- has now stalled, to the dismay of local business and community groups.
Shannon LNG's managing director, Paddy Power, has claimed that it was contrary to EU law to expect the firm to subsidise its competitors by paying for something that it would never use.
He said the charge could cost his company €85m a year and criticised the lack of detail on what the final charge to suppliers would be.
It has been claimed that Shannon LNG did not know that it would have to pay a tariff when it first entered the Irish market in 2006.
The firm has already spent €45m on the project, which it says is now at risk. It has lodged a complaint with the EU and is reportedly considering High Court action.
However, the CER said the decision emerged from a public consultation process that has been under way since January 2011 but had been "flagged" within the industry since 2003. The regulator says its decision is designed to protect consumers from price increases.
The interconnectors -- which cost €50m a year to run -- were developed by Bord Gais at the request of the Government when Irish gas supplies started running out.
They are considered essential to the security of Ireland's gas supply. The company passed the cost on to its customers but that cost is now to increase.
As Ireland starts producing gas -- from the Corrib gas field and suppliers like Shannon LNG -- the interconnectors will be used less and the cost of maintaining them will increase.
An internal memo from the regulator said the rising costs of the interconnectors could cause gas prices to rise by 15 per cent. The regulator decided against allowing Bord Gais to pass on the cost to its customers.
It ruled in June that the additional cost should be shared by all gas suppliers -- regardless of whether they used the interconnector or not -- in the interests of creating a level market place.
The levy will be imposed from 2014.
The energy regulator is now considering how the tariff should be priced and set up a forum for gas suppliers to discuss their concerns.
The forum -- the network transmission liaison group -- is expected to hold its first meeting next week. Shannon LNG is expected to attend along with Shell Ireland, which objected to the charge.
It won't be using the interconnector either, as it is bringing gas onstream at Corrib. In a submission, Shell claimed that the levy would reduce commercial incentive to invest in indigenous gas fields.
Jim Finucane, a Fine Gael councillor in north Kerry, said this weekend Shannon LNG's project was crucial to the area and had the potential to rejuvenate not only Kerry but the entire Shannon region.
"We cannot, as a State, allow this to fail," he said.