A boost to UK windfall taxes on natural gas could hit production and threaten Irish energy security, analysts warn.
Britain’s government is considering increasing the charge on windfall oil and gas profits by 3 per cent to 78 per cent in a move the industry says will slash investment and cut production.
Analysts at US stockbroker Stifel highlight a likely threat to Irish energy security from any fall in production, in a note on British energy companies.
“If the UK’s energy security reduces as increased windfall taxes kill domestic gas production, so will Ireland’s energy security as well,” say the brokers.
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They note that this country imports 80 per cent of its natural gas from Britain, while last year 15 per cent to 20 per cent of the electricity used in the Republic came from there.
National grid operator EirGrid confirmed the last year’s rise in the rate of electricity imports.
About half the electricity used in the Republic is generated by burning natural gas, leaving the State heavily dependent on the fuel.
Electricity demand here is poised to rise a further 20 per cent, the equivalent of two to three average-sized power plants, over the next six years.
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Gas Networks Ireland (GNI), the State company responsible for the system that supplies the fuel to industrial and domestic users, pointed out that an agreement between the two states requires any reductions in gas supplies to be on a proportionate basis across Ireland and Britain.
“Ireland is almost unique in the European Union in having no strategic gas storage facilities and this over-reliance on a single source of natural gas makes Ireland susceptible to supply disruptions, whether that being due to infrastructure interruption or market dynamics,” said GNI.
The company added that any disruption to supplies could hit electricity generation, with resulting social and economic damage.
While GNI argued that this is unlikely, it says it is one reason the country needs gas storage. The company is also working on developing an Irish biomethane industry.
A spokesman for the Department of Environment acknowledged that the Republic did not have adequate protection against significant disruption to gas imports.
“As a transitional measure, it may be necessary to introduce a temporary strategic gas emergency reserve to address security needs in the medium-term, to be used only if a disruption to gas supplies occurs,” he said.
The Corrib field off the Co Mayo coast supplies about 20 per cent of the gas used here.
The High Court recently ordered An Bord Pleanála to reassess an application from Shannon LNG, part of US multinational New Fortress, to build a liquefied natural gas plant in north Co Kerry. This would provide an alternative source of the fuel.
Opponents of the plan, including Futureproof Clare, want Government to halt the project.
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