€279m Bord Gais gas inter-connector gets go-ahead

The Government yesterday sanctioned Bord Gais to build a £220 million (€279 million) gas inter-connector parallel to its existing link with Scotland.

It has also signalled that it will provide funding for the extension of the national gas network to the north-west from Galway. Funding will be allocated through a competitive process, said the Minister of State at the Department of Public Enterprise, Mr Joe Jacob. It is thought the project could cost up to £25 million, although the extent of the Government's expenditure was unclear last night.

In addition, Mr Jacob disclosed that Bord Gais had entered discussions with the Northern Ireland Department of Enterprise, Trade and Investment on the possibility of constructing a pipeline linking Dublin and Derry, via Craigavon and Belfast.

It is believed such a pipeline would supply a power generation plant at Coolkeeragh, Co Derry, which is planned by the ESB. Mr Jacob said Bord Gais was discussing the project in partnership with a US pipeline company, Questar.

He also said he planned to reduce the threshold of the "eligible" gas market to include industrial users of at least two million standard cubic metres per annum, down from 25 million standard cubic metres.

This reduces Bord Gais's reserved market, a move thought to have been sought by competitors of the State company. Such operators, whose market was confined to 10 users, can now compete for an additional 100 customers.

Some Bord Gais competitors, or potential market entrants, sought to block the inter connector, claiming it would enhance the State company's position in a liberalising market.

This was rejected last night by its chief executive, Mr Gerry Walsh. He said: "That fails to recognise the different elements of the gas business between infrastructure and supply. This is a pro-competition decision.

"The impact is to reduce cost by providing adequate supply rather than having constricted supply."

Mr Jacob said approval of the inter-connector project was subject to Bord Gais accepting private sector investment in the pipeline, which it will co-fund.

The pipeline was sanctioned only because demand is expected to exceed supply at the end of next year.

The plan thought to have been discussed by the Cabinet on three other occasions, when certain Ministers expressed reservations about expenditure on the project.

"The most important issue is to get this project under way to ensure that sufficient gas supply is available in winter 2002," Mr Jacob said.

"I will be considering all the options for private sector participation in the coming months."

Such investment by the private sector - if forthcoming - will probably be structured as a public-private partnership, it is believed.

Mr Walsh said Bord Gais would welcome private sector involvement in the project. He declined to reveal the projected expenditure on its Northern Ireland project.

Mr Jacob also plans to issue a directive on gas tariffs to Bord Gais.