The Shannon LNG facility has been on the drawing board for more than a decade, but has yet to materialize despite Ireland wanting to diversify its gas supply away from dependence on imports from the UK.

The Eur500 million ($550 million) project seemed to have ground to a complete halt in the autumn of 2015, when its developer, US energy company Hess, sold up.

It coincided with the start of gas production at the major Corrib field offshore Ireland at the end of 2015, which much improved Ireland’s supply landscape, dampening the appetite for an LNG import facility.

But with the UK vote in June 2016 to leave the EU, Ireland has again looked at reviving the project, now reportedly in private hands, given the possibility of a future change in import regulations with the UK.

“The emergence of Brexit has necessitated a fresh look at our security of supply issues,” a spokesman from Ireland’s Department of Communications, Climate Action and Environment (DCCAE) told S&P Global Platts.

“Notwithstanding the priority to maintain the existing structures with the UK, if this secure trade in energy were to come under question, LNG would be one option to be considered to ensure security of supply,” the spokesman said.

“The potential benefits of importing LNG directly onto the island of Ireland, and also the role of natural gas storage, are therefore relevant in the context of Brexit,” he added.

A report to identify options to ensure Ireland’s resilience to a long-term gas and electricity disruption is being prepared, with LNG one of the main options under consideration.

Ownership

But Shannon LNG is a commercial project, giving the Irish government limited means to influence any investment.

“While the [DCCAE] minister has consistently been supportive of the proposal by Shannon LNG to construct an LNG terminal, this is a commercial project and so the minister does not have any direct involvement in its development,” the spokesman said.

He added that the ministry was not aware of the identity of the new owner.

But according to recent Irish media reports, Shannon LNG is now owned by Sambolo Resources, a privately-held, Dublin-based company.

Platts was unable to verify the ownership and could not reach Sambolo Resources for comment.

According to reports, the new owner is currently looking to find a buyer to take the project on.

Up until the end of 2015, Ireland imported the majority of its gas from the UK — the International Energy Agency estimated that Ireland was more than 90% dependent on a single transit point in Scotland.

Ireland’s gas consumption has stayed relatively steady over the past decade, but rose in 2016 along with the majority of European countries.

According to industry group Eurogas, Ireland consumed 4.8 Bcm of gas last year, up by 7% compared with 2015.

The startup of the Shell-operated Corrib field reduced Ireland’s dependence on the UK significantly — it quickly ramped up to 100% production capacity of some 10 million cu m/d, according to data from project partner Vermilion Energy.

Output is expected to remain at peak through the first half of 2018.

EC Support

But Corrib will decline over time, meaning Ireland would do well to consider another gas supply source.

Despite the fact that work on Shannon LNG has been shelved for the past few years, it continues to be listed on the European Commission’s Projects of Common Interest (PCI) register.

The PCI list includes projects that qualify for European funding and that would enjoy the benefit of accelerated planning and permit approvals.

The list was last updated in 2015 and is due for a further update later this year.

According to the list, the date of commissioning for Shannon LNG is set for 2018, but that date looks unlikely to be met.

Nonetheless, if work were to resume soon, the economics for the project look better than they did several years ago, with the cost of floating LNG import facilities having come down and LNG prices at relatively low levels.

A glut of LNG — including from the US which is geographically favorable for Ireland — has taken hold of the global market and is expected to endure into the early 2020s.

The peak send-out capacity of Shannon LNG was originally planned at 17 million cu m/d, which would give the facility a capacity of 6.2 Bcm/year, considerably more than current Irish gas consumption.

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