A proposal by Bord Gais Eireann (BGE) to build a second interconnector parallel to its existing link with Scotland should be subject to strict conditions, consultants advising the Department of Public Enterprise have concluded.

The Brattle group, based in London, has also rejected BGE's proposed tariff system for the transmission of independently supplied gas on grounds of efficiency.

The group also claimed that BGE's system - developed with consultants Arthur Anderson - was incompatible with the EU Gas Directive on the basis that it requires non-discrimination in setting tariffs and other terms of service.

Brattle said the BGE pipeline should go ahead only if groups proposing alternative sources of supply do not secure long-term contracts with industrial users of gas before a deadline.

In its final report to the Minister of State for Public Enterprise, Mr Joe Jacob, the group said the Government should authorise the construction of any gas pipeline that can show long-term contractual commitments at specific prices. But BGE should be required to wait until a deadline has passed.

Rising demand for gas and the depletion of the Kinsale field mean that the existing gas infrastructure will be sufficient to meet demand only until 2002.

Yet, while BGE has proposed building a second interconnector, costing some £300 million, a number of supply alternatives have emerged.

One Anglo-American group, Premier Transmission, has proposed building a cross-Border pipeline, linking the British Gas infrastructure in Northern Ireland with the Republic. Separately, a consortium part-owned by the US energy group El Paso Energy has proposed building a sub-sea link between Wales and Ireland.

In addition, Enterprise Oil, Marathon Petroleum and Statoil are also expected to receive sanction to commercially exploit the Corrib field off Co Mayo before the end of the year.

Bord Gais's chairman, Dr Michael Conlon, accepted last month that the Government was likely to defer sanctioning the second interconnector if the Corrib field was developed commercially. Mr Jacob has said he is awaiting indications from the Corrib partners on their proposals before reaching a decision.

Ultimately, Brattle's proposals - favouring a market-led approach - are likely to determine which of the projects go ahead.

The report said: "If BGE does not face competition from other potential projects, then there is no market test of its Interconnector 2 project. The project may be too big, resulting in higher prices if anticipated volumes do not materialise. Alternatively the project may be a more costly way of adding capacity than one of the proposed private pipelines."

It continued: "If no other pipeline has obtained sufficient longterm contracts to secure authorisation at that point, then BGE's Interconnector 2 project will be authorised by default.

"This system effectively allows large customers to choose which of several competing projects will be built. We believe that large users who are willing to sign contractual commitments are in the best position to evaluate the merits of competing proposals.

"If large users believe that Interconnector 2 is the most attractive project, then they can ensure its authorisation simply by refusing to sign contracts with any of the competing projects."