BP pulls out of Islandmagee gas project valued at £400m
Energy giant BP has pulled out of a planned gas storage facility in Co Antrim.
Last year, the £400m project, which will be capable of storing up to two month's worth of Northern Ireland's total gas requirement below Larne Lough, secured government funding guarantees.
Government agreement to act as guarantor for a proportion of the capital value of a project is intended to encourage private investment. But now Islandmagee Gas Storage Limited (IMSL) will have to look for new investors to take up just over 50% of the shares in the scheme.
Infrastrata said that the funds invested by BP have left the site in a position to cover existing commitments and leave sufficient funds to secure the project until there is new funding to develop it further. It is understood that around £5m has been invested in the project since 2007, and it is estimated that a further £4m will be needed to move the project forward to a financial-investment decision point.
IMSL is a joint venture between Moyle Energy Investments Limited, part of the Mutual Energy group of companies, and InfraStrata, which last week announced it had received planning permission to drill an exploratory oil well beneath Lough Neagh.
The gas storage facility at Islandmagee will have the capability to store 500 million cubic metres of natural gas, and IMSL received planning permission for the above-ground facilities in October 2012.
However, this week it was revealed that BP Gas Marketing Limited has withdrawn from the plan, after a review of its European-wide gas assets portfolio, which determined further investment in gas storage in Northern Ireland is no longer aligned with the portfolio's objectives.
ISML director, Paddy Larkin, said he was disappointed with the decision, but that the project will be continuing.
"The project remains intact and we have the funds available to secure the project for the future," he said. "We have a highly advantageous site, with uniquely favourable geology and proximity to major strong points on the electricity and gas grids.
"We've made superb progress with BPGM's assistance and are grateful for the contribution that BPGM has made in helping us advance the project to this point.
"It remains our firm purpose to find a new investor."
Andrew Hindle, chief executive of InfraStrata, added: "The project remains as important as ever for security of gas supplies to the north and south of the island, and a critical piece of infrastructure for the development of renewable generation on the island."
Applications have been submitted for three marine licences to the Department of Environment (DoE) and Northern Ireland Environment Agency. The DoE is currently liaising with key stakeholders through a Marine Science Group and consulting on an outline monitoring plan for the project.
Ireland currently imports 100% of its natural gas requirements and generates 60% of its electricity using natural gas. The Islandmagee project includes the development of seven caverns located 1,400m below the Larne Lough. Above ground facilities of the project include a gas plant, a leaching plant and a wellpad.
A vital need to store natural gas
Why is gas storage needed? Shouldn't Northern Ireland focus on renewable energy?
We generate 60% of electricity from natural gas and have to import our entire gas requirement.
Our location at the western limit of the European gas transmission network and its reliance on overseas gas markets makes it vulnerable to the consequences of any disruption to gas supplies on a local and/or regional level. A gas storage facility in Northern Ireland will permit the more efficient use of its existing gas infrastructure and safeguard its ability to meet the increasing peak gas demand, while providing a greater degree of security of supply.
Northern Ireland has a target to generate 40% of electricity from renewables by 2020, primarily through wind power. A shift to renewable energy sources is likely to result in an increasing reliance on gas-fired power stations to support the fluctuations in supply from the intermittent nature of wind. Gas storage facilities, such as this project, will be important to respond to the rapidly fluctuating gas supply demands.
Why use salt for gas storage and why does it have to be in Islandmagee?
Deep underground storage is one of the safest and most environmentally responsible methods of storing natural gas.
Pure salt, or halite, is an ideal medium for gas storage as it is impermeable to gas and can be easily dissolved in water to create a cavity deep underground.
The area around Larne Lough is the only onshore site on Ireland where salt deposits suited for gas storage use have been found.
Is underground storage safe?
Salt caverns have been used to store natural gas in Europe and worldwide for more than 40 years and have proved a very safe and efficient means of storing gas.
The potential hazards and risks associated with the storage of natural gas in salt caverns are well understood and effective safety standards have been developed.
(Source: Islandmagee Storage).