§ Rev. Ian Paisley
asked the Secretary of State for Northern Ireland whether, in view of the recent Coopers and Lybrand study on the future of the Northern Ireland gas industry, which concluded that it would cost less to construct a Scotland to Northern Ireland natural gas pipeline than to close down the Northern Ireland gas industry, he will reconsider the future of the gas industry in Northern Ireland and make a statement on the matter.
§ Mr. Giles Shaw
[pursuant to his reply. 30 October 1980, c. 368]:
Following full consideration of the Coopers and Lybrand report, the Government are satisfied that the decision announced in July 1979 against funding such a project remains correct. On the consultants' own findings, the construction of a pipeline would not make the Northern Ireland gas industry financially viable. Deficits of over £130 million would have been accumulated before the industry began to show any surplus, and over the whole period covered by the report any annual surpluses which might be earned would be insufficient to eliminate the deficits previously accumulated.
This is so even after allowance is made for a grant of 30 per cent. from the European Regional Development Fund towards the capital costs of the project, together with a loan from the European 519W Investment Bank, at favourable interest rates, towards a further 40 per cent. of the costs.
The consultants argued that, despite the lack of financial viability, a natural gas pipeline would, on their assumptions, be economically viable in terms of total United Kingdom resources. The Government believe that some of the assumptions made were incorrect and that for others there is every reason to take a more prudent view of the probable out-turn.
For example, the consultants assumed that the basic transfer price of gas would increase by 3 per cent. per annum in real terms but the Government's view based on the most recent assessments is that the increase between now and the end of the century is more likely to be 4 per cent. per annum in real terms. Further on present projections there would be no requirement for additional generating capacity in Northern Ireland this century solely to meet demand for electricity.
Thus there would be no savings from deferment of plant as the consultants assumed to offset any of the 79.5 million which they estimated as the loss of income to the Northern Ireland Electricity Service as a result of a natural gas pipeline.
Depending on the combination of values placed on these and other changes in assumptions which the Government feel to be appropriate, the building of a pipeline would produce a net cost which could rise as high as £120 million in resource terms, and a public expenditure increase which could reach £148 million, as compared with the closure of the industry.
The Government have also looked at the further work carried out by Coopers and Lybrand for the Economic Council on the supply of natural gas to Northern Ireland at less than its true economic cost. The position is, however, that economic pricing is fundamental to the Government's energy policy and this is now being reflected in the adjustments of gas prices in Great Britain towards their economic level. It would be quite inconsistent for natural gas now to be made available at less than its trus resource value.520W
Taking all the relevant factors into account, the Government have concluded that there is no sound basis for departing from the policy laid down in the announcement of 23 July 1979. In accordance with that statement, legislative proposals facilitating the closure of the industry will in due course be brought before Parliament.