Donegal energy firm plays up Irish angle to boost licence bid

There could be up to 200 years' worth of natural gas lying beneath the seabed in Irish waters, and one company believes we're in danger of selling it at bargain basement prices to multinationals.

Donegal-based Grianán Energy says it is the only completely Irish-owned company to bid for the latest round of exploration licences in the Donegal and Malin basins off the northwest coast.

Grianán is up against multi-nationals like Royal Dutch Shell, the main developer behind the controversial Corrib field.

Two of Grianán's directors, chief executive, Derek McLoughlin and operations director, Mark Turner, say their proposals for developing any gas that might turn up off the northwest will benefit the country, and give consumers and taxpayers a better return than anything they would get from the multinationals.

Mr McLoughlin says that Grianán is the only Irish-owned and managed company in the race for the latest round of exploration licences. "What we intend doing is building a power station at Burtonport in Donegal and taking the gas on shore there and using it to generate electricity for the national grid. The whole country is connected to the grid, so that means that everybody benefits," he says.

Mr McLoughlin argues that simply taking the fuel ashore and pumping it into the current gas distribution network means that only a limited number of people will benefit.

Mr Turner, who is responsible for putting the plan together, says Grianán intends processing the gas offshore and pumping it onshore at low pressure.

This is in contrast to Shell's plans for Rossport. That company will pump the gas ashore under high pressure and process it at Rossport, before pumping it into the main distribution system. This is largely the cause of local fears about the multinational's proposals in Mayo.

"We intend to reduce the pressure before it comes on land," Mr Turner says. "Electricity is easier to move around than gas, so it makes sense to generate electricity for distribution through the national grid."

Mr Turner adds that he has worked on similar schemes in Argentina, and says they have been successful. A number of Irish private equity investors have backed their plan. The company has access to up to €120 million for exploration and development. The project depends on Grianán getting the licence and finding gas. At this stage, it has spent €3 million on two seismic studies, both of which indicate that there are viable quantities of natural gas in the target area.

Mr McLoughlin says that these studies show that the area has a similar profile to the Corrib field, and thus should produce gas. Roughly one in five drills produce viable quantities of gas, and the company believes that the potential is there.

The licensing process will move ahead at the end of the month when the Department of Communications, Marine and Natural Resources comes up with a shortlist of bidders Grianán is optimistic that it will be on this list. "We believe that our bid is technically and economically superior to our competitors'," Mr McLoughlin says.

He argues that adding value will generate better returns for consumers and the Exchequer, which he says gets little real return from multinationals, who pay low rates by international standards for exploration licences. "If you produced €750 million worth of gas in a year, the Government will receive just €7,000 for the rights," he says.

He also points out that Grianán is in a position to start exploratory drilling in July, and in any case will have to begin work as soon as possible to give its investors the best chance of getting a return.

In contrast, multinationals can afford to sit on any licence they have for up to 16 years. While they are doing this, they pay the Government €27 per sq km a year. For the average exploration block, this works out at €135,000 a year, not a whole lot if you're Shell or a Statoil.

Mr McLoughlin argues that this figure should be tied to the wholesale price of gas, which would make it far more expensive for a company to sit on a valuable natural resource.

Realistically, it is unlikely the company will get the go ahead as early as July. In the meantime, it has applied for planning permission for a 350 mega-watt electricity plant at Burtonport.

Mr McLoughlin says that it will be holding public meetings to discuss the plans with locals. Or neighbours, as Grianán's directors are all rooted in west Donegal. "We're not going to pollute the area, we're from there," he argues.