Ireland 'may need price controls' if Russia turns off European gas supply

The Corrib field off the Mayo coast supplies around a quarter of Ireland's annual gas requirements, the rest coming from the North Sea via Britain

Ireland is not directly connected to the continental European gas pipelines and gets most of its gas from the North Sea via Britain to generate electricity from power stations.

The Government will have to put on the table all sorts of contingencies, including setting price caps on energy suppliers, to safeguard Irish energy supplies, a leading economics professor has said.  

Tony Foley, emeritus associate professor of economics at the DCU Business School, said it is "not clear" what policies the Government has in mind to ensure energy security for Ireland should Russia disrupt or turn off altogether its key gas supplies to Europe in the coming weeks.

The remarks come as fears continue over whether Russia will resume supplies at the same flows through the Nord Stream 1 pipeline when its annual downtime maintenance comes to an end in just over a week's time. 

In terms of gas security, Ireland is not directly connected to the continental European gas pipelines and gets most of its gas from the North Sea via Britain to generate electricity from power stations.

The island also gets gas from the Corrib field off the Mayo coast, which supplies around a quarter of the annual gas requirements, according to experts. 

However, the sky-high prices that generators across the island pay for gas to generate power for the all-Ireland electricity grid nonetheless reflect that North Sea gas price levels are also driven by Europe-wide prices because gas is a globally-traded commodity.          

Professor Foley said that the Government should now consider a range of policies, including possibly imposing price controls on the domestic gas producer, namely the Corrib field, and on windfall taxes on importers of energy.

"It is not clear what the Government's policy is over the medium term for dealing with the higher cost of energy and the other inflationary effects," the professor told the Irish Examiner. 

"Is it going to be continuous subsidies, and, if it is, how is it going to be financed by taxes on the better well-off or is it just (a matter) of living with higher prices?" he said.  

Cathal Ryan, a consultant at Cornwall Insight Ireland, said that if Russian gas supplies were cut Ireland would still likely have to pay significantly more for its gas, despite agreements that would likely keep supplies flowing from the North Sea.        

European wholesale gas prices on Wednesday for delivery in August, September, and October rose 5% to around €186 per megawatt hour as traders worried about the return of supplies through Nord Stream 1. The wholesale gas price is up massively from €15.25 per megawatt hour in October last year.

Bloomberg reported that the Nord Stream maintenance works have put market traders on edge. “The market now has all eyes on next week, where the maintenance is set to end, but where Europe and especially Germany fears that Russia will not restart flows on the pipeline,” Energi Danmark said.  

If Nord Stream doesn’t come back online, “Europe’s fiscal and energy policies set up to deal with restrictions in gas flows will face their first major test,” Rystad Energy analyst Nikoline Bromander said in a note. “Europe needs supplies now to build up its stocks before the heating season.”