Shannon natural gas project under threat

PLANS to construct a €500 million liquefied natural gas (LNG) regasification terminal on a 104 hectare site on the Shannon Estuary are under threat over the proposed introduction of annual costs of €21m for the use of interconnectors.

The developers of Shannon LNG have threatened to pull the plug on the project if the Irish Commission for Energy Regulation (CER) proceeds to levy gas suppliers with costs of €21m by transferring this tariff for the use of interconnectors to competing Irish suppliers, who don’t use interconnectors.
According to a consultation paper published last January by the CER, the rationale for this cross-subsidisation is to pay for the “security of supply” benefit of the second interconnector.
Another consultation paper was published by the CER in July, which LNG claims presented a completely new set of issues and proposals, which are not described adequately or clearly, including investor incentives, “diversity premium”, tariff volatility, tariff capping and the role of the Common Arrangement for gas in Ireland.
An economic assessment provided by DKN Economic Advisors estimated the value of the LNG project at over €206m annually for the Irish economy.
Shannon LNG will employ 500 people during the three-year construction programme and 100 full-time jobs afterwards.
Shannon LNG has made a formal complaint to the EU Commission that the CER proposals are anti-competitive, discriminatory, create barriers to entry, provide cross-subsidies, lack transparency and fair procedures and provide illegal State aid.
The promoters have advised they believe the consultation and options it contains are legally defective under Irish and European regulations and laws.
According to an assessment provided by the company, these proposals introduce a degree of instability to the regulatory regime in Ireland, which will have a chilling effect on any future investment and perhaps worst of all, they fail to address the primary issue identified by the CER with the interconnectors, namely the future stability of the associated tariff.