10.1: Appraisal of the Supply Options
In the absence of a domestic offshore gas discovery, new interconnector capacity to import gas into Ireland will be required, and the emerging supply/demand balance indicates that decisions will be required in the near future.
The principal import options are all based on the sourcing of supplies through Southwestern Scotland, along the routes currently used for the two existing pipelines, to a point north of Belfast and the separate line to a point north of Dublin.
There are three options. The existing lines could be expanded in capacity, through enhanced compression or through "twinning" of the pipelines. This option would supply the Northern and Southern markets separately, without connecting them. Alternatively, a North-South interconnector could be built, and extra capacity installed on one of the existing alignments either Scotland-Northern Ireland or Scotland-Republic. Gas would flow North-South in the first case or South-North in the second.
The option which expands capacity on the existing alignments, without interconnecting the Republic and NI appears to have lower capital costs, in present value terms, than either variant involving North-South interconnection. The extent of the cost differences depends on the demand scenario employed, and the differences are not large in certain scenarios.
Should a commercial discovery be made offshore Mayo, it would appear to be feasible to bring this gas to market in time to postpone the need for expansion of gas import capacity.
10.2: Recommendations
Our principal recommendation is that decisions about major capital commitments on gas import capacity should be delayed pending clarification of the position regarding the Enterprise gas discovery. In the meantime, it is prudent to spend on preliminary engineering, even if these expenditures come to be written off in due course.
We also recommend that all feasible measures be taken to defer the need for gas import capacity enhancement. The cessation of gas usage at the IFI plant in Cork would have a significant impact on the demand profile, and the gas infrastructure costs of continued production need to be taken to account in decisions about the future of this plant.
Capacity requirements are driven by peak demand. Given the pivotal role of power generation demand for gas in Ireland, running some power stations on oil through the Winter peak period helps to defer capex requirements. We recommend that the economics as well as the logistics of interruptibility at power stations in the Republic should be analysed in the light of the strategic investment decisions that may arise regarding gas import infrastructure.
Finally the pattern of gas demand will be affected by the decisions taken regarding the gas regulatory regime and the system of charging for gas transportation. We recommend that the new gas regulatory regime be clarified as expeditiously as is feasible.