Shannon LNG, the operator of Ireland's regasification plant project, has referred a dispute with the country's regulator about a proposed interconnector tariff to the European Commission, claiming a tariff for operating and maintaining the UK-Ireland natural gas interconnectors would amount to unlawful state aid.

Shannon LNG is awaiting a decision by the watchdog Commission for Energy Regulation (CER) on the proposed E10m annual tariff towards the operation and maintenance of gas interconnectors with Britain.

The company, a subsidiary of Hess LNG, has refused to pay the charge, saying it will not use the interconnectors.

"The tariff not only contravenes EU law but represents a massive policy shift from the previous government's stance on interconnector policy," Gordon Shearer, CEO of Hess LNG, told ICIS Heren on Thursday. "This switch in methodology is totally unreasonable and quite controversial."

Sherarer insisted that a tariff breaches EU Regulation 715/2009, which forbids cross-subsidies between network users.

The CER expects to reach a decision on the regulatory treatment of the gas interconnectors by the end of January.

A CER spokesman said: "We seek to balance the interests of gas customers with keeping Ireland as an attractive location for gas producers. The CER will also endeavour to comply with relevant European legislation and regulatory best practice."

Hess LNG has said it is committed to constructing the west-coast regasification terminal despite the possibility of a tariff, which would threaten to undermine the project's viability ( see ESGM 22 August 2011 ).

"We will still pursue it but the tariff seriously compromises the project," Shearer said. "Over a 20-year period, the tariff will cost E200m. Our current budget runs to E500m, so that's a 40% hit."

Hess LNG has been granted 100% of the capacity at the proposed terminal for a 20-year period. Shearer said the terminal had not attracted third-party interest from European utilities because of a perceived lack of liquidity in the Irish market. JE



Copyright 2011 Heren Energy Ltd. All Rights Reserved.

(Originally published December 2, 2011, in European Spot Gas Markets.)