Emergency Brexit oil storage budget overrun cost State €1.6m

A project to build an emergency oil storage facility for use amid concerns about the impact of Brexit went over budget and required approval for injection of an extra €1.6 million in State funding.

The project involved the refurbishment of a 40-year-old oil-storage facility on the Poolbeg peninsula in Dublin to help protect against an “oil emergency” in the run-up to Brexit, or in the future.

However, the Covid-19 pandemic saw costs on the project escalate with an enforced closure of the site for almost three months and increased claims from contractors caused by public-health measures.

An internal memo, prepared for Minister for the Environment Eamon Ryan said it was recognised that “management of the Poolbeg project has been problematic”.

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Spending of €28.7 million had originally been approved by the Department of Public Expenditure but more funds were required to complete the job.

The Minister was told the extra €1.6 million in spending by the National Oil Reserves Agency still represented “acceptable value for money” for the project.

The memo said the oil storage would help mitigate supply risks associated with all of Dublin’s commercial oil berths being located close together in Dublin Port on the other side of the river Liffey.

“This is significant as the Poolbeg facility provides for an alternative source of diesel and kerosene to the Dublin and Leinster markets, in the event of a disruption to Dublin Port, including for example one caused by potential traffic congestion at the end of the UK’s transition period,” it said.

The memo said the alternative to having strategic oil reserves in Ireland was to lease storage capacity from commercial providers in the European Union.

“In the wider context of Brexit, the development . . . will increase the percentage of our 90-day stocks reserves held in Ireland, which will improve our security of supply of oil products in the event of an emergency and, over time, replace stocks currently held in the UK,” it added.

It said the location of the project would be key in the event of an “oil emergency” and would allow stocks to be filled by tankers and released to the Dublin market if required.

A letter from National Oil Reserves Agency chief executive Pat Meehan said the project had been managed with “due rigour and care”.

However, Mr Meehan wrote: “It is currently estimated that such additional costs will amount to circa €1.5 million from the impact of Covid-19 alone.”

He also said there had been other additional claims from contractors exceeding the contingency figures used when the project was first being approved.

“Every effort is being made by the agency to minimise additional costs while adhering to and fulfilling contractual obligations,” Mr Meehan wrote.

“There are multiple layers and eyes on invoices that are presented for payment.”

Legal advice

The records also detailed how the agency had sought legal advice on the entitlement of contractors to extra payment and were told all claims were “legitimate”.

In a submission to the Minister, officials recommended that he approve the extra €1.6 million in spending on the project.

A statement from the department said: "Ireland is required by its membership of the EU and the International Energy Agency to maintain strategic oil stocks equivalent to 90 days of usage. The Poolbeg project is of significance in terms of meeting this requirement and oil security of supply generally.

“The site provides capacity to increase the volume of the State’s strategic diesel and kerosene reserves held in Ireland, and particularly in Dublin, where national demand is greatest.

“In addition, it provides primary storage capacity [capable of supplying product directly to the market] and allows for the repatriation of some oil stocks which, due to a shortage of storage capacity in Ireland, are held abroad.”