Press Release: March 8th,
2010: Shannon LNG Investment decision could drag on further than next
year says Hess CEO Gordon Shearer
Gordon Shearer,
CEO of Hess LNG, told Energy Analysts ICIS Heren over 2 weeks ago that
the Shannon LNG Investment decision could drag on further than next
year.
The Investment Decision is the key public indicator from
a private company that it is actually going to go ahead with the
project and attempt to obtain financing for the project.
The
CEO stated that the issues holding up the investment decision are
third-party access arrangements (which need both CER and EU approval),
engineering, fine-tuning the
planning applications, and crucially, the securing of LNG supplies.
Shannon
LNG has asked for a 30-35 year exemption from regulated third-party
access but, the CER has indicated that it will offer a maximum of 25 years,
partly on account of concerns it had about the possible domination of
the Irish market in the long term should it "decouple" from the UK. "
'Safety
Before LNG' believes that the real horse-trading is now about to begin
and that Shannon LNG will only be interested in the project if it can
obtain "pivotal supplier" status by the back door - which is forbidden
under EU law.
Endesa has applied for planning permission to construct a 450 Megawatt
gas-fired power station at Tarbert and Shannon LNG has plans to develop
its own gas-fired power station adjacent to the proposed LNG terminal.
Both plants, as current proposals stand, would only have access
to Shannon LNG-sourced gas because both plants are over 26 kilometres
from the national gas grid at Foynes in West Limerick and the proposed
pipeline from Tarbert to Foynes will only contain gas from the Shannon
LNG plant because the gas cannot flow in both directions. We believe
that this monopoly of becoming a "pivotal supplier" to approximately
900 Megawats of power generation by Shannon LNG will be detrimental to
competition in the wholesale market of gas-fired electricity generation
in the Shannon Estuary region and is now a highly-relevant
issue in Third-Party Access arrangements to be ruled on by the
CER and the EU.
'Safety
Before LNG' says that recent comments by Bord Gais CEO John Mullins
that Shannon LNG-sourced gas could be exported has now given a clearer
picture of the real issue and risks of possible decoupling from the UK
market. We believe that Shannon LNG sees a long-term gain if Ireland
becomes a net exporter of gas as this would entail a changing in
direction of the flow of gas in the gas interconnector with the UK. The
Shannon LNG project is not about security of supply to Ireland but
rather the eventual export of gas to the UK and, as feared by the
CER. , possible domination of the Irish market in the long term, should
it "decouple" from the UK.
'Safety Before LNG' is once again
calling for a strategic assessment of the Energy Hub proposed for the
Shannon Estuary as obliged under Irish and European law in order to
assess the cumulative impacts of any new energy policy such as
"decoupling" or the loss of the Transhipment Hub on the Shannon Estuary.
Note to Editor:
The
following was reported by Energy Intelligence Experts ICIS HEREN after
they interviewed Hess CEO Gordon Shearer on February 23, 2010:
http://www.icis.com/heren/articles/2010/02/23/9337262/lng/glm/irish-lng-terminal-decision-could-happen-this-year.html
Irish LNG terminal decision could happen this year
A
final investment decision on the Republic of Ireland's first LNG import
terminal could be made this year. The Irish energy regulator, the
Commission for Energy Regulation (CER), has confirmed that it is due to
make a decision on the Shannon LNG project Article 22 exemption
application "within the next month", having already published a draft
response last year expressing provisional approval prior to wider
consultation.
Hess LNG CEO Gordon Shearer told ICIS Heren: "A
final investment decision could be right at the end of this year or
early next year, but it could drag on further.
"We are going to
look at the third-party access arrangements because this defines the
project parameters. And it is not just in the control of the Irish
authorities, because the EU needs to approve it too. And we need to get
these before making a commercial decision." Shearer added that three
other aspects remain to be completed: engineering, fine-tuning the
planning applications, and crucially, the securing of LNG supplies.
Shannon
LNG has asked for a 30-35 year exemption from regulated third-party
access but, CER has indicated that it will offer a maximum of 25 years,
partly on account of concerns it had about the possible domination of
the Irish market in the long term should it "decouple" from the UK. The
UK supplies almost all of the country's gas at the moment, through two
interconnector pipelines from Moffat in Scotland.
Hess to keep control of capacity
The proposed Shannon LNG project structure is similar to that of the UK's South Hook terminal.
A
Shannon LNG infrastructure company (currently including consultancy
Poten & Partners as a minority shareholder) will operate the
terminal, and a separate company fully owned by Hess (referred to as
TradeCo) will control terminal capacity and engage in LNG purchase and
gas sales agreements.
The developers have rejected the idea of
holding open seasons for capacity, foreseeing that TradeCo will
negotiate bilateral deals when there is spare capacity and operate a
Use It Or Lose It (UIOLI) system along the lines of existing UK
terminals.
The CER may decide to supervise this terminal access regime and could outline this in an LNG Operating Licence.
Storage tanks key
Irish
gas demand has grown at an average rate of 3% over the past five years.
It was forecast at 5.6 billion cubic metres (Gm³) for Gas Year
2009-2010 - averaging 15.3Mm³/day.
A slight increase is expected this year but then is expected to decline to 5.5Gm³ by 2014-15.
Peak
Irish gas demand in 2009-10 was just 25.5Mm³/day, but in the longer
term the market should grow strongly, as penetration of gas is
relatively low compared with other European countries.
The
Shannon terminal is planned to have 17Mm³/day of send-out capacity,
rising to 28Mm³ in a second phase (the exemption application is for the
higher figure). As Shearer emphasises, the sponsors are conscious of
the importance of storage capacity - Ireland only has a maximum of
425Mm³ at the depleting Kinsale Head field - and the terminal plans
include provision of up to four 200,000m³ LNG storage tanks. BC
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