Section 3 (Part I) - The BGE/Sofregaz Report

Section 3: The BGE/Sofregaz Report

The expected strong growth in gas demand over the coming years combined with the depletion of the Kinsale gas field around 2004, led to a major gas demand study being undertaken jointly by the Department of Public Enterprise and Bord Gáis Éireann (BGE) during 1998. The scope of that study was to project Irish natural gas usage at intervals up to 2025 and to determine the optimal long-term transmission infrastructure required to meet these projections.

This section will describe the existing gas infrastructure on the island of Ireland as a whole. It will set out the latest set of supply configurations examined by the technical consultants and the optimal infrastructure option recommended by the consultants to BGE for the purposes of meeting gas demand in the future. The timing of each option is also examined to identify the points at which decisions have to be taken regarding new infrastructure. The latter is critical given the expected depletion of the Kinsale gas field by

3.1: The Existing Gas Infrastructure

There are two indigenous offshore gas reservoirs in Ireland – Kinsale Head and Ballycotton. Reserves in Kinsale, originally estimated at 1.5 tcf, are already in depletion. The Ballycotton Field came into production in 1991 and was estimated at about one-twentieth of the Kinsale Gas field. The latest production forecasts for both reservoirs suggest that the indigenous reserves will last until x, with annual production Beyond x all gas demand in Ireland will need to be met by imports, unless there are further indigenous gas discoveries.

Indigenous supplies have been supplemented since 1993 by gas supplies drawn from the UK system at Moffat. These supplies consist of gas from the UK North Sea or from the Norwegian gas fields connected to the UK gas grid.

Existing gas infrastructure serving the island of Ireland, including the associated pipeline infrastructure in Scotland, consists of:

the gas transmission system onshore in Scotland between

- Moffat and Brighouse, and between

- Twynholm and Stranraer

the Scotland-Northern Ireland interconnector between Stranraer in Scotland and Ballylumford in Northern Ireland, which is owned and operated by Premier Transco Ltd, a joint venture with shareholdings owned by British Gas (50%) and Keyspan Energy Corporation (50%);

the gas transmission system in Northern Ireland from Ballylumford to Sydenham on the south side of Belfast Lough;

the Scotland-Ireland interconnector between Brighouse in Scotland and Loughshinny in Ireland, which is owned by BGE;

the gas transmission system in Ireland which is owned and operated by BGE.

The main characteristics of the existing gas transmission system are set out in Table 3.1.

The Scotland-Northern Ireland Pipeline (SNIP) was constructed over a three year period between 1994 and 1996 at a cost of £110m.

Since October 1996, gas from the SNIP pipeline has been used to fire six generating units at Ballylumford (951 MW) in Northern Ireland. The station retains heavy fuel oil as a back-up fuel. At Ballylumford, gas enters the Belfast Transmission Pipeline (BTP) and conveys gas via a low pressure distribution network to customers in the Greater Belfast area. The BTP pipeline and the distribution network in Greater Belfast is owned and operated by Phoenix Natural Gas Ltd, a joint venture between BG (75.5%) and Keyspan (24.5%).

The SNIP was originally designed to meet the forecast demand from Ballylumford and the Greater Belfast market only. Should demand arise elsewhere in Northern Ireland then additional compression in Scotland and/or at Ballylumford would be required. We understand, however, that such reinforcement would not be required until 2010 or somewhat earlier should gas demand be higher than expected.

The Scotland-Ireland pipeline (SIP) was constructed between 1991 and 1993 at a cost of IR£287m.

The current capacity of the SIP is approximately 10 mscm/d but will increase to 14.5 mscm/d by the end of 2000, after the full installation of additional compression at Moffat. The SIP will reach its maximum capacity of 17 mscm/d by the end of 2001 after full installation of additional compression at Brighouse Bay (Phase 2) is completed. Thus as the indigenous supplies are depleted and as demand for gas continues to grow, new import infrastructure will be required at the earliest by end 2003/beginning of 2004, based on BGE’s high gas demand scenario (Gas World B), and assuming no further indigenous gas discoveries.

The original BGE/Sofregaz study considered several supply configurations. A preliminary investigation was carried out on five configurations by sizing the required infrastructure and determining their phasing and cost estimates. All options were considered assuming a firm demand for gas in the powergen and non-powergen sectors.

Subsequently, BGE and Sofregaz undertook further optimisation of the three main supply configurations and assumed interruptibility at Poolbeg power station. Therefore, the original results from the BGE/Sofregaz study are no longer considered material to the evaluation in hand. This evaluation is only concerned with the supply options proposed assuming interruptibility at the Poolbeg Steam Plant as the base case. The demand scenarios assume interruptibility at Poolbeg up to and until the new import infrastructure is commissioned – assumed to be the 1^st. January 2004 under Gas World B, and the 1^st. January 2005 under Conventional Wisdom.

Three main supply configurations were examined:

A new interconnector parallel to the existing Scotland-Ireland interconnector (UK1).

A new interconnector parallel to the existing Scotland-Northern Ireland pipeline with a North-South link flowing South between Sydenham and Ballough (UK2).

A new interconnector parallel to the existing Scotland-Ireland interconnector with a South-North link flowing North from Ballough to Sydenham (UK1-SN).

A fourth supply configuration was examined which considered:

the impact of an Enterprise discovery off the West Coast and a pipeline from Mayo to Galway plus other network development onshore in Ireland. There is also a requirement at some stage for additional import infrastructure when demand becomes capacity constrained.

We return to this option later under the discussion on Enterprise.

BGE are considering other options and scenarios which are not considered in this report, namely:

The possibility of constructing compression on the Dublin-Cork pipeline for 2002 but sized for a short term horizon. This would be followed by reinforcement on the western side of the country consisting of a Galway Ring Main or a pipeline from Corrib down to the west coast, should Corrib prove commercial.

A pipeline from Corrib direct to Dublin. BGE have put the sizing of such a pipeline on hold pending further information ……………….. on gas flows, etc.

Further onshore development, including pipelines to

The methodology employed by the engineering consultants is based on optimising the required gas infrastructure for each route and for each gas demand scenario as follows:

Identifying the different modules (consisting of pipelines and compressor stations) to be modelled and determining the respective pipe diameter and power of compression for each module for the different options. The consultants originally used transient analysis for the year 2025 to identify the different modules with year by year phasing based on steady state simulation. However, the latest set of supply configurations, which are presented here, is based on transient analysis.

Determining the different flowrates to be used at the supply points and at the delivery points.

Determining the capital and operating costs (capex and opex) up to 2025 and calculation of the Net Present Value (NPV) for each module.

Determination of the total NPV for each supply configuration and each demand scenario.

Selection of the supply configuration giving the lowest NPV for each demand scenario.

3.2.2: Cost Estimates

The following assumptions for average unit costs for pipeline and compression investments were used to ascertain estimates of capital cost:

In UK xUSD/inch/metre

In Ireland x USD/inch/metre

Offshore Pipeline: x USD/inch/metre

Compression: x USD/installed/kW

Operating costs were calculated by taking a percentage of the capital expenditures:

Opex Pipeline: x% of the capex related to pipeline sections

Opex compression: x% of the capex related to compression

A real discount rate of 7% was used to compute the net present values.

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