Section 6 - Alternative Supply Options

6.1 Introduction

Apart from the gas supply options under consideration in this report, a number of other possible sources of supply need to be considered. These are:

The possible gas find by Enterprise Oil Ltd off the west coast.

The proposal by Canatxx to build a pipeline from Anglesey to supply the Irish market.

The proposal by Questar to build a pipeline connecting Belfast and Dublin, connecting with a pipeline from the west coast if supplies materialise there.

Each of these options has a degree of uncertainty about it. The Enterprise proposal is uncertain because it is not proven that there is a commercial find off the west coast. The other two are in the preliminary stage of project development.

In addition, while not an alternative supply source as such, there is the possibility of running the Kinsale field during the winter only. During the summer, no gas would be taken from Kinsale, and all supply would come from the existing interconnector. More gas could then flow from Kinsale in the peak winter months, effectively extending the useful life of the existing infrastructure, and postponing the need for new investment.

The existence of these proposals, and possible other proposals in the future, is a reflection of the fact that the regulatory structure of the industry in Ireland is about to change. Bord Gáis Éireann’s monopoly is to be ended, and other firms will be allowed to transport and sell gas in the Irish market. There will also be third party access to BGE’s pipeline network.

Enterprise Oil Ltd is currently exploring for gas 60km off the coast of Mayo, in what is known as the Corrib field. Tests carried out in 1998 on this field yielded promising results, and more tests to be carried out in the summer of 1999 should determine whether the field is commercial. A further prospect nearby – the Shannon prospect – will also be explored in the summer of 1999.

Until these tests are done, it will not be possible to put a figure on the quantity of gas there might be in these fields. However, according to Enterprise, the reserves might be one trillion cubic feet (tcf) in Corrib, while Shannon, though more speculative, might hold 0.8tcf. For comparison, the Kinsale field had reserves of 1.4 tcf.

Should the tests show that the Corrib field is commercial, a decision to go ahead with development would be made in second or third quarter of 2000, and gas could be flowing in October 2002, on the basis that the supply infrastructure takes two seasons to build. The exploitation of the gas would involve the construction of an extraction facility on the seabed (i.e. no permanent floating rig) and a pipeline system to shore, and from there ………………. to the national gas grid

If the Enterprise field(s) prove commercial, and are developed, it will have implications for any plans to build further supply infrastructure between Britain and Ireland. If the fields are developed, gas could be flowing from them as early as the Autumn of 2002, before the new interconnector needs to be in place. Therefore, the construction of the interconnector could be postponed, the interconnector that would be built might be smaller, and reinforcement thereof could also be postponed.

The degree of postponement and redesign of the interconnector project is not yet determined, but it is likely that if both the Corrib and Shannon fields prove commercial, the project could be postponed by a very considerable time, and might be considerably smaller. Further indigenous gas discoveries might postpone a second interconnector indefinitely.

On the face of it, the most obvious way to get west coast gas to the market would be to build a pipeline to Dublin, where the bulk of demand is concentrated. This would appear to be Enterprise’s view of the matter. However, Bord Gáis Éireann have suggested that an option for a pipeline supplying the west is by means of a Ring main connecting Dublin, Galway, Limerick and Cork. This would avoid the need to reinforce the Dublin-Cork pipeline.

What would effectively happen is that the gas from Enterprise would serve the market in the south and mid-west of Ireland, and the gas from the interconnector(s) would serve the Dublin and Leinster market.

A company now called Providence, (formerly part of Arcon) holds interests in the Celtic Sea. It has a 100% interest in what is acknowledged to be an oil discovery on block 49/9 (called Helvick), with estimated reserves of 10 million barrels. It also owns 60% of the so-called Ardmore discovery, to the south of Helvick, which is believed to contain 40 to 60 bcf of gas.

To the east of these, Providence has a 75% interest in block 50/11, where hydrocarbons have been discovered (back in the early 1970s by Marathon), but never fully tested. A well is required to properly assess this discovery which could contain gas, and is bigger than the others.

The established Providence oil and gas discovery remains to be properly tested. Whether gas will ever be produced from this acreage is difficult to predict, and will depend on the oil price and the general economics of joint exploitation of smaller oil/gas discoveries.

We judge that the Providence acreages may eventually produce gas, but not soon enough to require to be taken into account as part of the present exercise.

Exploration for gas offshore Ireland has become commercially more attractive as Kinsale Head depletes. Should Enterprise prove successful off the West Coast, it is possible that activity will be stimulated. Marathon, amongst others, has already committed resources, and a bigger exploration programme could produce further discoveries, but no such development is likely to arise soon enough to affect decisions about gas supply options over the next few years.

The Enterprise field(s), if they prove commercial, could start to come on stream as early as the Autumn of 2002. If so, they will have a very significant impact on any interconnector project, postponing its construction and likely reducing the extent of the investment. At this stage, there are no other discoveries or exploration plans which are likely to have a material effect on the decisions about infrastructure.

Canatxx has put forward a proposal to build a pipeline from Wales to Ireland, as part of a project to build gas-fired power stations and the related supply infrastructure at Anglesey (Wales) and Fleetwood (Lancashire). The infrastructure would also supply an aluminium plant in Anglesey, though Canatxx have stated that they would proceed with the project even if the Aluminium plant was closed and they did not get permission to build a power station in Anglesey.

The proposed interconnector would be the same diameter and pressure as the existing Scotland-Ireland interconnector (24" and 148 bar)

At present, Anglesey is supplied with gas by a 36" pipe from Bodfari (80km away), which is connected to the UK NTS by an 18" pipeline from Maelor (a further 45km). The pipeline from Bodfari to Anglesey is a low pressure pipe, with a limit of 34.5 bar.

Canatxx see their project in two phases. Phase I involves three elements:

The connection from Maelor to Bodfari would be reinforced by a new 24" pipeline,

A compression station would be built at Anglesey, and

the sub-sea interconnector would be built, which would connect to the BGE network, probably south of Loughshinny.

The initial flow-rate would be 200 mcf/d, with the immediate potential to increase this to 400 mcf/d. The interconnector itself could carry up to 800 mcf/d, if sufficient onshore supply was in place.

Canatxx claim that this phase from start to finish could be completed in 30 months. On the basis of plan in 1999, design in 2000 and build in the Spring and Summer of 2001, gas could be flowing by the winter of 2001. The cost of this phase is estimated by Canatxx at Stg£80-90 million.

Phase II could be put in place when the demand conditions warranted it. At present a new 36" pipeline connecting the NTS to a power station in Fleetwood is being planned.

This would allow the interconnector to carry up to 800 mcf/d.

A large gas storage facility is planned in salt caverns at Fleetwood. This will enable the company to buy gas at off-peak prices and store it for subsequent use.

Interconnector capacity could be increased further if a x" as opposed to a x" sub-sea pipeline were installed.

Canatxx have stated that the interconnector "would provide a gas supply to the company’s own developments" in Ireland, as well as "mak(ing) capacity available to eligible third parties in accordance with an EU Directive".

The company contends that this is a good time to build pipelines. This is because of the low price of oil, which means that the level of exploration is very low. Therefore there is a low utilisation of pipe-laying equipment and expertise at the moment.

When asked about the impact a supply from Enterprise might have on their plans, Canatxx stated that the Corrib field would benefit them, since if the Enterprise discovery were commercial, it would meet more than Ireland’s needs, and therefore there would be a need for export. The gas could be exported to Britain through Canatxx’s pipeline. However, it is not yet clear, from our understanding of the situation, that gas from an Enterprise development would flow in sufficient quantities to warrant export.

The proposal from Questar has three parts –

A Northern segment from Larne to a point south of Armagh city;

A Southern segment running on to Dublin;

A Western segment running from Mayo to the intersection of the Northern and Southern segments (there are two possible routes for this segment).

Questar envisage a joint venture approach to the construction of their pipeline system, and are searching for partners for this purpose. The pipeline would be open access. It appears that Questar are interested in gas transportation rather than buying and selling gas.

This option has been examined by BGE and Marathon. However, a practical difficulty has arisen. At the moment, the capacity on the interconnector is roughly 10 mcm/d, which is insufficient to meet the summer demand. Therefore, running Kinsale winter only could only be done once extra compression is put in place on the interconnector. This would take two years (i.e. until 2001), by which time Kinsale would be so much further run down that it would not be practicable to run it winter only.

Furthermore, if Kinsale were to be run winter only, the Dublin-Cork pipeline would have to carry the gas to meet Cork summer demand. To do this, the pipeline would have to be reinforced, a number of years earlier than planned. This further reduces the attraction of the option.

Gas storage in the Kinsale Head Reservoir has been considered

Similarly, the importation of LNG appears to be uneconomic in comparison to importation by pipeline, and neither of these options is considered in this report. We comment elsewhere on the opportunities to economise on peak capacity of pipelines through resort to interruptibility.

To Section 7