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New source of gas won't cut bills for consumers

Paul Melia - Irish Independent

HOMEOWNERS and businesses are unlikely to see any drop in their gas bills even if fracking goes ahead and shale gas is brought to the surface.

Bord Gais energy trader John Heffernan said that despite having an indigenous supply of natural gas, prices were unlikely to drop because the developers would probably sell to international markets, and not directly supply customers here.

While the US had experienced a "shale gas revolution" with domestic prices plummeting, a similar scenario was unlikely to arise here, he said.

This is because the Irish market is so small that prices are linked to the UK.

"It's hard to say what impact it (fracking) would have," he said. "I would imagine any gas that comes on stream will be linked to the UK price, but if you had a massive volume that might change and could create a separate price in Ireland.

"In the US, shale gas has its own market and the price came down massively. In the UK, they're getting licences for fracking. What impact that will have on prices is hard to say."

Ireland is heavily dependent on imported oil and gas to meet our energy needs. The Sustainable Energy Authority of Ireland (SEAI) says we import about 90pc of our fossil fuels, with the remainder coming from indigenous sources including peat and gas from the Kinsale field.

The enormous bill amounts to some €6bn a year, much of which is passed on to consumers on their electricity bills and at the pumps.

While most of our imports are sourced within the EU or from OECD countries, the SEAI highlights that these supplies are declining.

Although exploration for alternative sources is under way here, very few projects have led to commercial discoveries. Of the 157 exploration wells drilled since 1970, just five have been commercially exploited. One of those, Corrib, has yet to come on stream.

In the US, the price of gas has dropped hugely in recent years as shale gas production ramped up. In 2005 and 2008, gas was trading at $16 (€11.60) – $18 (€13) per MMBtu, a unit of measurement, and it has since dropped to $4 (€2.91) – $6 (€4.36). In the UK, the price is around $9.50 (€6.90) per MMBtu, rising to $18.35 (€13.30) in Japan and Korea.


Mr Heffernan said that if shale gas was exploited across Europe – the UK, Poland and other countries are actively exploring the technology – it may help stabilise prices, but not necessarily lead to reductions.

"If you had shale gas, there would be a steady supply, which would help stabilise prices," he said. "European gas supplies are diminishing in Denmark, Holland and the UK. The European Commission is saying if we have shale gas, it will replace what's being lost.

"You're really looking at the impact of shale on prices across Europe. Europe is trying to put the framework in place to bring shale on board because there's the much bigger picture of a lack of competitiveness with high energy costs and manufacturing costs.

"The impact (of fracking) could be a safe, stable source of gas, which means we can avoid the price volatility."

Posted Date: 
4 March 2014