Thursday, 23 February 2017

Brexit boost from Ireland's gas isolation

EU-MEMBER state Ireland’s reliance on British gas is set to strengthen the UK’s hands in the looming Brexit talks, reports Peter McCusker.


WHILE efforts will be made to downplay the politics of Brexit, there’s little doubt they will surface, as Switzerland discovered in its negotiations with the EU three years ago.

When trying to gain access to the European internal energy market talks were curtailed following a Swiss referendum vote on immigration.

The politics of the Brexit talks figured in a submission by Paul Hallas, regulation and strategy director at energy firm Centrica, to the Business, Energy and Industrial Strategy (BEIS) Committee in its inquiry ‘Leaving the EU: negotiation priorities for energy and climate change policy’, last month.

He said that in a ‘rational world’, the energy industry would want to preserve as much as possible of the existing internal energy market arrangements.  

However, he expressed fears that, although preservation of the internal energy market’s rules would be in the interests of consumers, energy policy risked being caught up in the politics of the wider Brexit negotiations.

And, as we head for ‘Hard Brexit’ there are concerns that a potential disruption to current trading arrangements between ourselves and the EU would impact on UK energy security and increase prices.

However, the UK does have an ace up its sleeve as European member state, and neighbour, Ireland is dependent on the UK for over half of its gas, with this dependency set to increase over time.

In a recent paper considering ‘Brexit’s Impact on Gas Markets’ Dr Thierry Bros at the Oxford Institute for Energy Studies elaborated on this Irish issue saying that Post-Brexit, it would be ‘impossible for Ireland alone to mitigate a serious gas supply disruption’.
He said: “The issue of Irish security of supply is going to be extremely important during negotiations and could be used by the UK to try to preserve the status quo as this is the cheapest way to provide security of supply to Irish consumers.”
In this month’s White Paper unveiling the Government’s 12 Brexit objectives Theresa May said the government is ‘considering all options for the UK’s future relationship with the EU on energy’.

It went on to say that the UK wants to maintain ‘efficient, cross-border trading of energy’.

And, in what may be viewed as veiled threat, it continued ‘the government is particularly keen to avoid disruption to the all-Ireland single electricity market, which covers both the north of the island and the republic’.

Both the UK and Ireland are members the Internal Energy Market (IEM) along with 26 other member states and a recent report for the National Grid says this helps lower gas costs, improves storage and cross-border electricity trading through interconnectors.

Cross-border gas trading plays a key role and experts at world-leading market analysts Platts say at times this winter, when the temperatures have plummeted, we have relied on the Belgian and Dutch interconnectors for up to 20% of our supplies.

Although, over the summer, gas tend to flow the other way as the Continent replenishes it gas storage facilities from the UK’s North Sea supplies.

Last week we reported how a new Teesside gas terminal for LNG will boost UK energy independence and the Government is hoping that further such developments, and the emergence of a UK shale industry will reduce reliant on interconnector gas.

Global Platts associate editor Gary Hornby says that despite the developing single energy market the UK still pays a premium for continental-delivered gas of 5% over the winter.

He says that if the Brexit talks struggle and tariffs are imposed on the UK the pipelines will continue to flow, but believes it will be ‘counter-intuitive for the European Brexit negotiators to make it more difficult for Ireland to secure gas’.

Jon Gluyas, a professor of Geo-Energy at the Durham Energy Institute at Durham University, added: “The Irish economy is now heavily dependent on the IT economy which has a high power demand, and while it is much smaller market than the UK, it depends on the UK for almost all of its gas sup

Follow Peter McCusker on Twitter @mccusker60